Octane Report

OCTANE ENHANCING PETROLADDITIVES/PRODUCTS

LITERATURE REVIEW AND ANALYSIS

September 2000

DUNCAN SEDDON & ASSOCIATES PTY LTD.116 KOORNALLA CRESCENT

MOUNT ELIZAVICTORIA 3930

TEL 03 9787 4793FAX 03 9770 1699

E-mail: [email protected]

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Duncan Seddon & Associates has been retained by Environment Australia to provide aliterature survey and analysis of octane enhancers that may be used in Australia and help thenation to implement better fuel quality standards.

The report has been prepared for the sole benefit of Environment Australia. Any third partyin the possession of the report may not rely upon its conclusions without the written consentof Duncan Seddon & Associates.

Duncan Seddon & Associates conducted this analysis and prepared this report utilisingreasonable care and skill in applying methods of analysis consistent with normal industrypractice. All results are based on information available at the time of the study. Changes infactors upon which the study is based could affect the results. There is no implied warrantyor merchantability or fitness for a particular purpose shall apply.

Acknowledgment

Duncan Seddon & Associates expresses its sincere thanks to contributions from Dr. JohnHarris of RMIT for his assistance and analysis of the blending of oxygenate additives andgasoline.

I would also like to thank Professor Jorma Ahokas and Peter Jackson of RMIT for usefulcommentary on the toxicity of additives and for providing a reference to NOHSC data.

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EXECUTIVE SUMMARY

Overview

The move to harmonise Australian fuel standards with those of Europe willhave a profound effect on the manufacture and supply of petrol. Amongst otherfactors, harmonisation requires an increase in motor octane. This is the subjectof this Review.

As well as increasing octane, harmonisation will require limits to be placed onthe levels of aromatics and olefines in the petrol. These components have anaturally high octane and the new limits will make the manufacture of high-octane petrol more difficult. Whilst this can be achieved, it will only be doneso at an increased cost to the motorist and an increased cost to the environment.

In order to ameliorate these costs, octane-enhancing additives may prove usefulto Australian refiners and importers. The availability, cost and environmentalimpact of these additives are reviewed.

We are concerned with the production of petrol, which has no other use than asa fuel for transport. Petrol comprises a mixture of many thousands of differenthydrocarbon compounds plus additives that may contain other elements. Veryfew are non-toxic or unhazardous in some way or other. Although used in largequantities by the motorist, the general public rarely comes into contact withpetrol. It is always confined to sealed vessels, and modern-filling techniquesminimises fugitive emissions and splashes.

Like the components of petrol, each of the octane-enhancing additives presentenvironmental and health issues. All of the problems are solvable within theboundaries of fuel production, storage, transport and distribution.

Fuel harmonisation is occurring across the world. Whilst the primary aim is tofacilitate the introduction of better emission standards for vehicles, there will beanother effect, namely an increase in trade of fuels as opposed to basestocksand refinery intermediates.

Because fuels will be produced to similar standards across a range of countries(eg South Asia), there will be an opportunity for refiners to benefit fromeconomies of scale and supply several markets with petrol. This will serve tobenefit the motorist by holding down price rises that would otherwise occur asa result of the increased costs of production of the better quality fuel.

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Although there will be opportunities for the larger and more modern Australianrefineries, the increased cost of producing the higher quality fuels may createdifficulties for the smaller and older refineries. Market share currently suppliedby the latter refineries may be lost to interstate refineries and imports.

Because of the large volume use of petrol, and to minimise shipping costs, it isshipped in relatively large vessels. To permit effective trade and preventshortages, we have to guard against using Australian fuel standards as a meansof unfairly discriminating against imported product.

The danger is the tendency to ban specific petrol components as a reaction toadverse media coverage or to pacify local political pressure. Obviously localbans of specific components is contrary to fuel harmonisation.

A specific case in point is the ether additive MTBE. This is the most widelyused octane-enhancing additive, but is currently under suspicion in the US as acontaminant of water supplies. Because of the contamination of vessels,banning MTBE (and similar ethers) could effectively present a barrier toimporting lower cost petrol.

Further, banning ethers (or any other additive) would require extensive testingof product. Because of the scale of import, refusal of entry of a contaminatedvessel, would result in disruptions to the local petrol supply chain, inevitablyincreased prices for the motorist, and potentially shortages and rationing.

Taking all of these points into consideration, and aiming to achieve theoptimum outcome for the motorist, refiner, importer and the environment, thedirection of the recommendations is to facilitate maximum flexibility in thesupply of petrol to the proposed new, higher-octane petrol standards.

Review Findings

It is technically feasible for Australia to adopt Euro-3 petrol standards withoutresorting to octane enhancers. However, this will constrain the industry toproducing petrol high in aromatics.

Mass production of high octane 98 RON and Euro-4 fuel will probably requireoctane enhancers.

Suitable octane enhancers are alcohols, ethers and organometallics such as theadditive MMT.

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Of the alcohols, methanol is to be avoided. Ethanol is the alcohol of principalinterest. It is used in petrol in Australia and elsewhere. Ethanol can beproduced from biomass, but to remain competitive would require a subsidy -ethanol is currently free of excise.

However, there are serious issues with the use of ethanol, which remain to beaddressed. These include air toxicity and water contamination. It is highlylikely that it will be difficult, if not impossible, for ethanol - petrol blends tomeet Euro-3 specifications from the standpoint of summer RVP (60 kPa limit).Waiving this limit for ethanol would undermine the reasoning for a low RVPvalue in Euro-3 and Euro-4.

The use of higher alcohols (propanols, butanols) will be constrained by supplybut may be able to make an occasional contribution in selected instances.

Of the ethers, MTBE is the preferred oxygenate of world oil industry. It iswidely used in Europe, the USA and the Far East. It is not currently used inAustralia.

The controversy surrounding the use of MTBE is a consequence of the failureto properly control petrol transport and storage. All oxygenates (includingethanol) are likely to suffer a similar level of concern if they were widely used.

The MTBE controversy may lead to the phase out of MTBE in the USA. Thisis likely to severely disrupt world markets for oxygenates and petrol feedstocks.It will cause a major worldwide reappraisal of the approach to octane.

It is doubtful if Europe could adopt the new standards (Euro-3 and Euro-4)without the use of MTBE.

Other ethers (TAME, ETBE, DIPE) are likely to be useful in occasionalcircumstances. Their use is likely to be constrained by supply. Their use islikely to be marred by the MTBE controversy.

The use of the manganese additive MMT is highly controversial but hasgrowing acceptance in the refining industry. MMT may be useful in producinglead replacement petrol and to achieve the lower Euro-4 aromatics level.

Optimum results may be obtained by using a mixture of additives so as toameliorate the deficiencies of each of the additives.

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RECOMMENDATIONS

1. MTBE is the preferred octane enhancer of the world oil industry andwould be suitable for use in Australia. In order to ameliorate concernswith groundwater contamination, a national audit on the status of gasolinetransport (pipelines) and storage should be conducted with the object ofidentifying issues that would lead to pollution of water supplies by anygasoline component.

2. Prima facie the use of ethanol is incompatible with proposed standards

with respect to oxygen content and RVP at the commonly used 10% level.Waivers specifically for ethanol in these areas are not in line with the aim ofthe standards. Nevertheless, we recognise the social desire to see ethanolincluded in the Australian gasoline pool. The use of ethanol in futureAustralian gasoline pool should be subject to further analysis, particularlydefining how the required RVP from ethanol blends can be met usingAustralian basestocks.

3. In order to maximise the flexibility for refiners or importers to providehigh octane gasoline, it is possible that ETBE and TAME could be used,once these chemicals have been notified by potential manufacturers andimporters to NICNAS and assessment certificates have been issued. ETBEand TAME are not currently listed on AICS.

4. The widespread introduction of 98 octane fuel would require a substantialreview of octane production in Australia, implying a major overhaul ofrefinery operations. It is not clear if 98 octane will result in a net globalemissions improvement. Until this is clarified by additional work, thewidespread introduction of 98 octane gasoline should not be encouragedby automakers and regulatory agencies.

5. There should be no in-principle objections to the use of either MMT or

ferrocene. MMT is the best researched and most widely used and wouldoffer the refiners a method of ensuring the final gasoline is of the requiredoctane (trimming). There is increasing interest in ferrocene, however, thedepth of analysis is much less that that for MMT. Further there are severalalternative suppliers of ferrocene and quality standards of the additive maybe a concern.

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6. To facilitate flexibility, the following oxygenates should be permitted in

Australian petrol. These oxygenates could be used alone or incombination with other oxygenates or permitted organometallic compounds(MMT, ferrocene). The maximum level should be set by the Euro-3maximum oxygen content of 2.7%:

Oxygenate Chem. Abstract No.

Ethanol 64-17-5 TBA 75-65-0 MTBE 1634-04-4 DIPE 108-20-3 ETBE 637-92-3 TAME 994-05-8 ETAE 919-94-8 Isopropanol 67-63-0 n-propanol 71-23-8 Isobutanol 78-83-1n-Butanol 71-36-3sec-Butanol 78-92-2

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CONTENTSAPPROACH ...............................................................................................................1Objectives ..............................................................................................................................................................1

Nomenclature ........................................................................................................................................................2

IDENTIFICATION OF CHEMICAL ADDITIVES .........................................................5History....................................................................................................................................................................5

MTBE and Water Contamination.......................................................................................................................6

Other Oxygenates and Other Additives ..............................................................................................................7

Octane Boosters to be Studied .............................................................................................................................8

Non Oxygenate Octane Boosters .......................................................................................................................11

High Octane Hydrocarbons ...............................................................................................................................12

EFFECTS ON PETROL CHARACTERISTICS, ENGINE EFFICIENCY,COMPATIBILITY, AND EMISSIONS PROFILE.......................................................15Background to Octane Boosters ........................................................................................................................15

Fuel Blending Overview .....................................................................................................................................18

Blending Studies..................................................................................................................................................19

Climate .................................................................................................................................................................21

Alcohol and Ethers Emissions profiles ..............................................................................................................22

Greenhouse ..........................................................................................................................................................23

Ferrocene .............................................................................................................................................................25

MMT ....................................................................................................................................................................25

Automotive Finishes and Parts ..........................................................................................................................27

Automotive Industry Views................................................................................................................................29

FINANCIAL COSTS OF THE ADDITIVES...............................................................31Background .........................................................................................................................................................31

Methanol ..............................................................................................................................................................32

Ethanol.................................................................................................................................................................33

MTBE...................................................................................................................................................................34

Other Oxygenates................................................................................................................................................35

Implication of Californian and US Ban on MTBE...........................................................................................35

Trade in Gasoline Components (BTX, Alkylate)..............................................................................................37

ENVIRONMENTAL AND HEALTH EFFECTS OF ADDITIVES ...............................39Background .........................................................................................................................................................39

NICNAS and AICS .............................................................................................................................................40

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Methanol (CAS 67-56-1).....................................................................................................................................40

Ethanol (CAS 64-17-5)........................................................................................................................................42

TBA (CAS 75-65-0) .............................................................................................................................................43

Other Alcohols.....................................................................................................................................................44

MTBE (CAS 1634-04-4) .....................................................................................................................................48

Proposed US MTBE Phase-Out - Blue Ribbon Panel......................................................................................49

TAME and Other Ethers....................................................................................................................................51

Comparison to BTEX and Alkylate...................................................................................................................52

Comparative Data ...............................................................................................................................................52

Ferrocene (CAS 102-54-5) ..................................................................................................................................54

MMT (CAS 12108-13-3).....................................................................................................................................54

Gasoline Components .........................................................................................................................................56

IMPEDIMENTS OF HARMONIZATION WITH EUROPEAN UNION QUALITYSTANDARDS ...........................................................................................................59Overview..............................................................................................................................................................59

Environmental Impact of Increased Aromatics in Gasoline Pool ...................................................................62

Issues ....................................................................................................................................................................62

STAKEHOLDER INPUTS ........................................................................................67Motoring Organisations .....................................................................................................................................67

Australian Institute of Petroleum ......................................................................................................................67

Federal Chamber of Automotive Industries .....................................................................................................69

RECOMMENDATIONS ............................................................................................71

REFERENCES.........................................................................................................73

EXHIBITS.................................................................................................................75

Duncan Seddon & Associates Pty Ltd.

APPROACH

Objectives

This report is concerned with identifying and describing octane boosting chemicals that mightbe used in Australia for the production of high octane petrol. The petrol specifications aredelineated in the Fuel Quality Report [COFFEY] and are aimed at harmonising Australianfuel quality and standards with European Union standards for petrol, the so-called Euro-3 andEuro-4 fuels.

The report conducted by RMIT University [RMIT] of November 1994 detailed the use ofoctane enhancers to that time. Although this early report was primarily concerned with theelimination of lead additives in petrol, the descriptions and use of alternative octane boostersto lead alkyls is still largely valid.

The Study Objectives were:

1. Identify chemical additives/products that may be added to lead replacement petrol and/orunleaded petrol to increase its octane number.

2. Identify the potential:

− Effects on petrol characteristics, eg RON, MON, volatility etc;

− Effects on engine efficiency (in terms of fuel consumption) and performance;

− Effects on compatibility with current and future motor vehicle emission reductiontechnologies;

− Effects on other vehicle and engine components, eg spark plugs, fuel systems,exterior paint and ornamentation; and

− Changes to the vehicle tailpipe and evaporative emissions profile

Which may arise from the use of these additives/products in Australian petrol.

3. Compare the financial cost of each of the additives/products to reach the desired octanenumber.

4. Provide details on, and advise on the significance of, environmental and health effects ofthe chemical additives/products.

5. Identify impediments to Australia�s objective to harmonise with European Union petrolquality standards due to the use of these additives/products

6. Provide recommendations on octane enhancement additives/products that could besuitable for use in petrol in Australia, for both unleaded petrol and lead replacementpetrol. This should include consideration of the various climatic conditions experiencedin Australia.


Literature and Information Available

Since the earlier RMIT study, there has been a revolution in the availability of information,primarily as a consequence of the explosive growth in the Internet.

Three sources of basic information have been used in this Study:

• Reports from government agencies and industry bodies published on the Internet.Obviously some of this data may in the light of subsequent analysis be proved misleading.Nevertheless, the data pertinent to this Study is substantial, principally from organisationsoperating in the USA. These reports are presented in EXHIBITS as an annexe to theStudy.

• Articles and reports in academic journals and learned society publications. These are

subject to peer review and can be considered to give data to a high level of accuracy withassumptions, etc, delineated in the article. Because of the nature of publication, even withmodern electronic publishing methods, there is a considerable time lag between anobservation and a publication, often as much as two years. This data was accessed usingthe Chemical Abstracts database via RMIT University. These data sources are referencedin [SQUARE BRACKETS] and listed at the end of this report.

• Patents and industrial know-how which may become available to those in the trade.

Patents have a similar time lag to academic papers and are not critically reviewed.Pertinent know-how on major issues was also obtained from the major stakeholders. Thisdata is referenced with the data source as necessary.

NomenclatureGasoline and Petrol

In the industry gasoline is the universal term for the liquid fuel used in spark ignition engines.Petrol is a trademark, however, the term petrol is used almost exclusively in Australia andother former British colonies. In this report, generally we adopt the industry term gasoline.

Chemicals

The several chemical compounds studied are usually known by older (non IUPAC) names.For most compounds there are a variety of synonyms, abbreviations and acronyms1. SinceIUPAC nomenclature can be cumbersome and rather esoteric, the most commonly used nameabbreviation or acronym is used. To avoid confusion, the Chemical Abstract referencenumber (CAS) is used to identify the specific chemicals. As well as Chemical Abstracts,many databases and Internet sites can be searched on CAS number. This helps avoidconfusion as a consequence of poor nomenclature.

The aromatic chemicals benzene, toluene and xylenes are often referred to as BTX. In thisusage, the xylenes component is the C8 aromatics fraction made by reforming. The fraction is

1The United States Environment Protection Authority gives a good list of alternative names for alcohol and etheroctane boosters at http://www.epa.gov.swerust/oxygenat/oxytable.htm


often referred to as virgin xylenes or mixed xylenes. This fraction also contains significantvolumes of ethylbenzene as well as the three isomers of xylene (dimethylbenzene) in a ratiowhich reflects the relative thermodynamic stability (ie about 50% meta-xylene and about 25%ortho- and para-xylene).

In some instances this group of aromatics (benzene, toluene, ethylbenzene and xylenes) isreferred to as BTEX.

Gasoline Extender

In the USA and Brazil, ethanol is used in relatively large volumes in the gasoline, namelymore than 10% of the final product. In some parts this use is described as a gasolineextender, because the locally produced ethanol displaces what would be otherwise importedgasoline or crude oil. This term is also used in Australian ethanol blending operations. Inother words the term gasoline extender is used to describe the use of an additive whichdisplaces refinery produced gasoline from the market and is done irrespective ofconsiderations of the octane requirements and air quality requirements.


IDENTIFICATION OF CHEMICAL ADDITIVES

PRODUCTS THAT MAY BE ADDED TO LEAD REPLACEMENT AND/ORUNLEADED PETROL TO INCREASE OCTANE NUMBER

History

This Study concerns the identification of additives, which may be used as octane boosters togasoline. Since the mass production of the automobile in the early 1920s, octane boostershave been part of the fuel supply chain. The efficacy of lead additives was identified early inthe industry and lead based additives became the universal octane booster.

The first drive for the elimination of lead based octane boosters came during the 1970s. Itwas realised that air pollution in many of the cities of the USA was a consequence of vehicleemissions. The prime technology for ameliorating these emissions was catalytic convertersand lead is inimical to catalysts.

In order to use catalytic converters, but maintain the level of octane in the gasoline (importantfor maintaining efficiency - miles per gallon), new octane boosters were required.Consequently, there was a large research effort into octane boosters, which could becompatible with catalytic converters.

Concomitant with this was the realisation of the problem with lead in the urban environment,particularly in large cities where the distribution of lead correlated with traffic densities.There was then a movement, which became worldwide, for the elimination of lead in gasolineon health grounds. Again this forced a search, particularly by European based organisations,for additives which could assist lead replacement by boosting octane.

The 1970s period saw the identification of alcohols, ethers and the manganese additive MMTand the iron additive ferrocene as possible alternatives to lead. The era also saw theidentification of MTBE as being the most widely acceptable alternative. From this timeMTBE started to be used as a gasoline additive in many parts of the world at typically 1 ~ 2%level.

In the early 1980s, it became evident that catalytic converters were not controlling the level ofair pollution in certain cities in the USA. These cities suffered from photochemical smog, themain contributors to this was carbon monoxide, unburnt hydrocarbons, nitrogen oxides andfugitive emissions of certain gasoline components, referred to as volatile organic compound(VOCs).

The city with most problems was the Los Angeles area of California and California became apioneering state in terms of analysis, promotion and legislation of alternative (clean burningfuels such as methanol) and reformulated gasoline.

The US Clean Air Act Amendments (CAAA 1990) attempted to solve the air pollutionproblem by mandating formulae for the component mix of gasoline, so called reformulatedgasoline (RFG). Of particular interest was the mandated introduction of certain levels of


oxygen in the gasoline. This could be supplied by the octane booster MTBE at about the 10 ~15% level. This caused an enormous increase in demand for MTBE and plants were built inmany parts of the world (eg Middle East) to supply the US and particularly the Californiandemand.

California is the world�s largest single market for gasoline and the demand for MTBE causeda massive expansion in plants producing MTBE to supply this market. Because of costs andpossible shortages of MTBE oxygenate, opportunities for other alternatives were considered.

Ethanol has a long history for use as both a gasoline extender, octane booster and as analternative fuel. The momentum for using ethanol was helped by its ease of production froma wide variety of agricultural sources, hence can be considered a sustainable fuel. Theworld�s largest use of ethanol is in Brazil, where ethanol is used as an indigenous fuel supplyfollowing the oil shocks of the early 1970s. There has been extensive research on the use ofethanol as a fuel in the USA and Europe. The largest promotion for ethanol use is by the so-called corn states of the USA (centred on Nebraska). Their powerful industry lobby hassuccessfully secured tax-breaks for the use of ethanol produced from corn, allowing it tocompete with MTBE in the US market. Ethanol is widely used as an additive in the corn-beltstates.

To help promote the use of ethanol in gasoline, the ether derivative ETBE can be produced inMTBE plants.

One of the problems with production of MTBE is the supply of the C4 olefine isobutenefeedstock. In order to supplement supplies, C5 olefines (pentenes, old name amylenes) can beused, this produces TAME.

Where refinery operations have an excess of propylene, the ether DIPE can be produced inplace of MTBE.

Parallel to the use of alcohols and ethers was the progressive development of MMT as areplacement for lead and its use in a small number but widespread locations. The additiveferrocene has received spasmodic interest.

MTBE and Water Contamination

After about five years of use in reformulated gasoline in the USA, MTBE was detected inground water in several states (eg California and Maine). The primary source ofcontamination was from leaks or illegal drainage from underground gasoline storage tanks. Asecond source was from leaking pipeline systems, which supply the very large Californianmarket with gasoline. A third source was from older recreational watercraft operating onlakes and waterways.

In California there are a large number of private wells and other schemes, which use theground water as potable water. The MTBE contaminant tainted the water (it can be detectedby taste at the parts per billion levels).


In May 1997 the California Legislature considered discontinuing the use of MTBE in theState. This has generated a substantial level of activity on how best this might be achievedand what are the alternatives to MTBE as both the provider of oxygen and as an octanebooster. Much of the reported work is available on the Internet [EXHIBIT 26].

Momentum continued to build up national for action and the US Environment protectionAuthority (EPA) set up the �Blue Ribbon Panel� to consider the issue of MTBEcontamination of water supply on a national basis.

This activity is continuing with the US Executive promoting bills in Congress that would leadto MTBE being phased out.

Other Oxygenates and Other Additives

The emphasis of this Study is on materials which might be added to gasoline in order to boostoctane.

It should be realised that there is a large range of materials added to gasoline before use in avehicle. These additives are added to the basestock within the refinery, at the rack by thefuel-distributor or on the forecourt by the motorist. These additives contain detergents andother compounds containing elements in addition to carbon and hydrogen. Such additivepackages claim to improve gasoline and offer product differentiation in the market from thesame refinery source. The role, impact and environmental fate of such additives are beyondthe scope of this Study.

As well as boosting octane, alcohols and ethers also add oxygen to the gasoline. There maybe a need to add materials, which add oxygen but not necessarily improve octane. There maybe a group of materials, which have not been studied in this report, which may be effectivefor this duty and not harm the final product. There are several possible additives.

For example, one of these products, marketed as Fuel Effect, contains fatty acid esters. Thisproduct is primarily marketed as a combustion improvement aid, particularly for dieselengines. In addition, when used in spark ignition engines, Fuel Effect is claimed to lower thecarbon monoxide emission - one of the principal reasons for incorporating oxygen in fuel[data provided by GRAF ENTERPRISES PTY LTD - EXHIBIT 14].

As witnessed by a visit to a typical auto-shop there are many additives that can be added tofuel which are claimed to improve engine performance. It would seem churlish to proscribetheir use in gasoline provided that the gasoline met the appropriate standard and no adverseeffects to the longevity of the engine and ancillary parts resulted.

Because these materials, in general, do not cause a significant lift in octane they are notstudied further.


Octane Boosters to be Studied

The octane boosters and a brief history of their use as fuels are:

ALCOHOLS

Methanol: CAS 67-56-1

Methanol is a major commodity chemical with some 25 million tonnes produced annually(Mt/a). Its main use (ca. 50%) is in the production of formaldehyde, which is used with ureafor the production of adhesive, which is used to make particleboard. The remaining 50% isspread across a wide variety of industries of which the production of MTBE is prominent.

The main driver for the use of methanol is that it is made from natural gas and is easilytransported as a liquid. It can potentially be made in very large volumes and delivered atbroadly similar costs to conventional fuels.

Methanol can be used as a fuel in its own right. Its very high octane makes it attractive forspecialist auto sports enthusiasts (drag racing). It has occasionally been used with ethanol inBrazil when that country has failed to produce sufficient agricultural ethanol for its ownneeds. Methanol is a clean burning fuel and there have been extensive trials in California andelsewhere on the use of methanol fuels. These uses are not subject to this Review.

Methanol can also be used as an octane booster in commercial gasoline. However, it is notvery fungible (stable) because traces of water cause it to separate. However, this problem canbe ameliorated by the addition of higher alcohols such as TBA. Again there have beenextensive trials, particularly in California.

Methanol addition is permitted under the US EPA rules for the production of reformulatedgasoline2.

In Australia3, methanol is produced in a small research plant at Laverton in Victoria; there areseveral proposals for major facilities to be established in WA and NT.

Ethanol: CAS 64-17-5

The use of ethanol as a fuel for spark-ignition engines dates from the advent of the motorvehicle industry. The more widely available and cheaper petroleum products displacedethanol. Interest in ethanol fuels was rekindled after the 1970s oil price shocks and thegrowing interest in renewable fuels.

World production capacity is 24 Mt/a (560,000 bbl/d) with a further 0.8 Mt/a (17,700 bbl/d)planned. Most fuel grade ethanol is produced in Brazil (45%) and the USA (20%) with these

2Federal Register Vol. 62. No. 133, 37388, July 1997 re proposed Rules for Gasoline.3The National Energy Research Development and Demonstration Program (NERDDP) supported work on theproduction and use of fuel methanol in Australia. Seven technical reports and consultancy reports are listed asavailable in the March 1990.


countries dominating world usage. There is also some production in France and Canada,India and China and small amounts in Australia.

Brazil requires that all gasoline sold contains 24% ethanol and approximately 4 million carsare designed to operate on 100% hydrous ethanol (95% ethanol, 5% water). This creates ademand of 220,000 bbl/d.

The US consumption of ethanol is dominated by the corn producing states of the mid-westwhere it is used as a component of Federal reformulated gasoline and as a gasoline extender4.The current demand is about 80,000 bbl/d

In Australia there have been extensive trials of ethanol in gasoline5. There are severalproducing facilities for ethanol.

TBA (Tertiary Butyl Alcohol; 2-Methyl-2-Propanol): CAS 75-65-0

Work during the 1970s indicated the superior properties of TBA to other alcohols from thestandpoint of gasoline compatibility.

TBA is produced within the petrochemical industry as an intermediate and for specific uses.The production is small, mainly in the US Gulf Coast and Europe. Total annual production isabout 2.6 Mt/a (60,000 bbl/d).

TBA can be produced in the same plant as MTBE and can often be a contaminant ofcommercial MTBE. The small amount of TBA in the MTBE has little effect on the latteradditive's efficacy.

IPA (Iso Propyl Alcohol, 2-Propanol) CAS 67-63-0

This is listed as an acceptable additive for Euro-3 and Euro-4 fuels6.

Over 2 million tonnes of IPA are produced annually, mainly in USA, Europe and Japan. It isused as a solvent and to produce other chemicals. At present a major portion of IPA isproduced from acetone (which in turn is produced as a byproduct from the manufacture ofphenol). A small amount of acetone (hence potentially IPA) is produced in Melbourne.

Refineries can produce considerable quantities of propylene and this can be the immediateprecursor to the production of IPA. This would be an attractive route to refiners with noalternative use for propylene.

4Marketed as gasohol, 10% ethanol in gasoline.5 The National Energy Research Development and Demonstration Program (NERDDP) supported aconsiderable amount of work on the production and use of fuel ethanol in Australia. 35 technical reports,workshop reports and consultancy reports are listed as available in the March 1990.6 Environment Australia �Setting National Fuel Quality Standards - Paper 2, Proposed Standards for FuelParameters (Petrol and Diesel)� April 2000, p. 56 (Table 6.4)


Other Alcohols:

The following alcohols are used within the petrochemical industry. The main interest in thesematerials is that they can be produced from synthesis-gas (carbon monoxide and hydrogen).This in turn can be produced from any carbon source such as natural gas or even municipaland agricultural waste. The process is a variant on the Fischer-Tropsch process for theproduction of synthetic fuels. It was practiced during the early 1950s to produce iso-butanol7.During the 1980s, especially in Europe, there was considerable research into improving theprocess and a modern plant would probably produce a range of lower alcohols centred onbutanol.

Some of these alcohols can be produced by fermentation processes and can be classified assustainable fuels. Nowadays these materials are produced by a variety of differentpetrochemical processes.

n-Propanol (1-Propanol): CAS 71-23-8

This is listed as an acceptable oxygenate for reformulated gasoline in the USA8. The alcoholis produced by OXO process from ethylene or by direct oxidation of propane. It can beproduced as a byproduct of fermentation processes.

n-Butanol (normal butyl alcohol, 1-Butanol): CAS 71-36-3

Produced by the OXO process from propylene and several other routes.

sec-Butanol (secondary butyl alcohol, 2-Butanol): CAS 78-92-2

Produced by hydration of butenes (byproducts in production of ethylene). This alcohol isproduced in large quantities for the production of the solvent MEK (methyl ethyl ketone).

iso-Butanol (isobutyl alcohol, 2-Methyl-1-Propanol) CAS 78-83-1

This is listed as an acceptable additive for Euro-3 and Euro-4 fuels. Nowadays made by theReppe process from propylene but would be the principal product of modern Isosynthesisplants.

ETHERS

MTBE (Methyl-Tertiary-Butyl Ether): CAS 1634-04-4

MTBE is the principal oxygenate and octane boosting additive with worldwide use.Manufactured by the addition of methanol to the olefin isobutene (2-methylpropene). Thelatter is produced as a byproduct to refinery and petrochemical operations and can be madefrom the butane component of LPG.

7Known as Isosynthesis.8Federal Register Vol. 62. No. 133, 37388, July 1997 re proposed Rules for Gasoline.


World production capacity of MTBE is 21 Mt/a (522,141 bbl/d) with a further 7 Mt/a ofcapacity in construction or planning. MTBE has no other significant use other than as a fueladditive.

TAME (Tertiary-Amyl-Methyl-Ether): CAS 994-05-8

TAME is used extensively as a supplement to MTBE in the USA for reformulated gasolineand as an octane booster in Europe. World production capacity is 2 Mt/a (46,819 bbl/d) ofwhich 50% is in the USA, with a further 0.7 Mt/a (6,364 bbl/d) planned.

ETBE (Ethyl-Tertiary-Butyl-Ether): CAS 637-92-3

ETBE is widely used as an additive in the USA and Europe (France, Russia). The principaldriver is to produce an ethanol derived additive that is better suited to gasoline blending thanethanol.

World production capacity is 3.7 Mt/a (91,000 bbl/d) with an additional 0.8 Mt/a (20,800bbl/d) under construction. Most capacity is in the USA and (except European plants) areflexible operations, which can switch between MTBE and ETBE.

DIPE (Di-Iso-Propyl-Ether): CAS 108-20-3

DIPE is a permitted additive under US Federal reformulated gasoline regulations and theproposed Euro-3 and Euro-4 rules. It is made from propylene and water. Isopropanol is abyproduct. The world capacity is unknown but probably small.

DIPE production and blending properties have been described [McNally].

ETAE (Ethyl-Tertiary-Amyl Ether): CAS 919-94-8

This is the ethanol variant of TAME, permitted under US Federal reformulated gasoline rules.There is a paucity of data on this additive.

Non Oxygenate Octane Boosters

Organometallic compounds boost octane but contribute negligible oxygen content (if any) tothe finished gasoline. Until now, lead alkyls have been dominant. Many otherorganometallic compounds have been tried, but only two have emerged with potential. Aniron based additive, ferrocene, and a manganese additive, MMT.

Ferrocene (dicyclopentadienyl iron): CAS 102-54-5

Ferrocene is a dark orange coloured powder, freely soluble in hydrocarbons. It is availablefrom Associated Octel as the additive PLUTOcen(R). To date, ferrocene additive has


struggled to gain industry acceptance. The basic problem appears to be the erosive nature ofthe combustion products. Several companies in China also sell the product.9.

MMT (Methylcyclopentadienyl Manganese Tricarbonyl): CAS 12108-13-3

MMT is a liquid octane enhancer for unleaded and lead replacement petrol. It is a purecompound of low vapour pressure (0.05 mmHg @ 20C), high flash point (96C) and thermallystable to its boiling point (232C). MMT has extremely low solubility in water, but is freelysoluble in gasoline.

MMT is the principal metal-based octane booster considered in this Study. This has beenextensively research from the 1950s and is in widespread use in several countries. All of theoil majors have had some experience in using MMT overseas.

High Octane Hydrocarbons

There are several components of gasoline of high octane which a widely traded. These couldbe used as octane boosters and blendstocks and are considered in this Study whereappropriate for comparative purposes. These materials are:

Butane: CAS 106-97-8: This is one of the two principal components of LPG, also producedin refineries as byproduct in various unit operations. Many millions of tonnes are tradedannually.

Benzene: CAS 71-43-2: This is a major commodity chemical (world annual trade about 15Mt/a). Benzene is the basic building block for the manufacture of styrene and nylon.

Toluene: CAS 108-88-3: This is a major intermediate with principal use the production ofbenzene. Often used to boost octane in gasoline for the premium unleaded grades.

Xylenes (mixed): CAS 1330-20-7: This is traded to produce ethyl benzene (for production ofstyrene) and ortho- and particularly para-xylene. The latter isomer is used for the productionof polyester.

Isooctane (traded as alkylate): CAS 540-84-1: This is not widely traded but central to theproduction of high octane, low benzene, low sulphur gasoline and jet-fuel.

The additives subject to this review are summarised in Table 1.

9The recent use of the additive in China is reported by industry sources to have resulted in the widespreaddamage to the cylinder and valves of vehicles. This is speculated to have been the result of too much additive(many times the recommended dosage) being used.


TABLE 1SUMMARY TABLE

COMPOUND CAS No Mentioned in Legislative Rulesas Gasoline Additive

US Europe

Methanol 67-56-1 yes yesEthanol 64-17-5 yes yesTBA 75-65-0 yes yesMTBE 1634-04-4 yes yesDIPE 108-20-3 yes yesETBE 637-92-3 yes yesTAME 994-05-8 yes yesETAE 919-94-8 yes yesIsopropanol 67-63-0 yesn-propanol 71-23-8 yesIsobutanol 78-83-1 yessec-Butanol 78-92-2n-Butanol 71-36-3MMT 12108-05-8Ferrocene 102-54-5Benzene 71-43-2Toluene 108-88-3Butane 106-97-8Isooctane 540-84-1Xylenes (mixed) 1330-20-7


EFFECTS ON PETROL CHARACTERISTICS, ENGINE EFFICIENCY,COMPATIBILITY, AND EMISSIONS PROFILE

Background to Octane Boosters

Octane is a measure of a fuels tendency to knock in a test engine when compared to otherfuels [MAPLES, p.25]. Knocking occurs when the fuel/air mixture explodes on thecompression stroke of the engine cycle, ie before the application of the spark. This creates aloud knocking noise within the engine and can lead to engine damage.

For ranking fuels, the fuels are compared to certain standards in a special test engine (CFRtest-engine). Isooctane (2,2,4-trimethylpentane) has a low tendency to knock and is given anoctane number value of 100. Normal heptane, on the other hand, has a great tendency tocause knocking and is given an octane number value of zero. The octane number of a fuel isthat value which will give the same knocking tendency of a proportional mixture of isooctaneand n-heptane.

Research Octane Number (RON) is determined in the test engine at a relatively low speed(600 rpm). This is to simulate city driving at low speed with frequent acceleration. MotorOctane Number (MON) is measured at higher speed (900 rpm) which simulates highwaydriving. For most fuel components RON is greater than MON.

Whereas RON and MON are determined in a laboratory test engine, road octane is properlydetermined by road tests of vehicles or dynamometer testing of vehicles. Road octane is notthe same as the average of RON and MON with which it is sometimes confused. Therelationship between the road octane and RON and MON is dependent upon the vehicle beingtested.

In other words, vehicles with the same nominal compression ratio may require different levelsof octane for optimum performance. To avoid the issue of vehicle variability it is usualpractice to produce (ie. sell) a gasoline octane slightly higher than that required from aconsideration of vehicle compression ratios (often referred to as octane premium or octanegive-away)

There have been several attempts to solve the problem of relating RON and MON to roadoctane [MAPLES 1993, page 26].

As well as RON and MON the difference between them is used to judge fuel quality. This isknown as the sensitivity of the fuel and a maximum value is specified for the gasoline;typically the sensitivity should be less than 10.

In the USA the average of RON and MON (referred to as (R + M)/2 or blending octane BON)is often quoted.


Chemistry

From the standpoint of fundamental chemistry we are concerned with the propensity of anexplosive mixture of air and fuel to detonate. The chemistry of flames is well known[SEMENOV]. Flames and explosions have three phases - initiation, propagation andtermination. The chemistry is dominated by free radical reactions in all stages.

In considering octane, we are concerned about the suppression of the initiation of the processuntil application of the spark. An obvious method is to provide a fuel with an innately highresistance to the formation of free radicals (eg aromatics) or a component, which acts as a freeradical trap or quench.

It is in this latter role that organometallic compounds act. These compounds are relativelythermally unstable and easily produce low energy free radicals with a low propensity to formfree radical chains but will act as free radical scavengers. Thus if chain forming free radicalsare formed, these are quenched by the low energy free radicals formed from the additive.Quenching continues until the application of the spark, which produces a massive wave ofhigh-energy free radicals, which initiates the explosion.

Free radical quenches and traps are very efficacious and are used in very small amounts,typically in the parts per million range.

The most widely used octane booster has been an alkyl lead compound. Many otherorganometallic compounds have been studied of which one, MMT has emerged as a realisticalternative. Other organometallic compounds based on iron have been used.

As might be expected from the above discussion, the effectiveness of the octane booster isdependent on the nature of the hydrocarbon components in the fuel. This is well known forlead alkyl compounds which have been extensively studied [GARY 1984, page 199]. Theadverse influence of aromatics on the effectiveness of MMT has also been reported [RMIT1994]; high aromatics lowers the effectiveness of MMT.

By contrast, alcohols and ethers primary role is to provide high-octane blendstock. Alcoholsand ethers have octane values typically greater than 110 RON. Thus when blended into abasestock of octane value about 90, in volumes of several percent (ie many orders ofmagnitude higher than used for the organometallic compounds) an octane boost occurs.

Although these oxygenates are not primarily radical quenches, they may serve a role in thisaction (especially given the high concentration at which they are used). This is evidenced bythe higher blending octane values of oxygenates than the natural octane when used as a fuel intheir own right [RMIT 1994].

Octane Values of Oxygenates

Again there is some variation in the efficacy of the oxygenate with the composition of thefuel. This was demonstrated in the Australian context by research in 1982 [BRAUN]. Thiswork determined the blending octane for various octane boosters with three differentbasestocks.


The salient data from this work is given in Table 2.

TABLE 2EFFICACY OF OXYGENATES ON PETROL OF DIFFERENT COMPOSITIONPetrol A B CRON 89.2 88.4 86.1MON 80.0 82.3 78.3Saturates (%) 57.3 68.4 50.7Olefins (%) 7.3 0.6 28.3Aromatics (%) 35.5 31.0 21.0Blending RONMTBE 121 120 120Methanol 135 140 135Ethanol 132 138 135TBA 107 107 114Toluene 115 113 114Blending MONMTBE 103 109 102Methanol 100 111 98Ethanol 105 115 102TBA 91 88 93Toluene 92 96 94

These results clearly demonstrate that the alcohol additives are sensitive to the composition ofthe gasoline. Particularly note the Sensitivity (RON - MON) for ethanol which is much largerthan the sensitivity for MTBE. This underlies refiners concerns that ethanol may beinadequate for lifting MON values and maintaining final gasoline sensitivity withinspecification.

Inspection of the literature indicates a wide variation of octane values for the additives ofinterest. This is presumed mainly due to the variation in the chemical composition of thebase stocks used in the determination (often not given). In this Study we have used datapresented in the RMIT report for blending calculations: Table 3.

TABLE 3EFFECTIVE BLENDING VALUES

sg (kg/L) % O2 (wt.) RON MON RVP (kPa)Methanol 0.796 49.9 130 100 250Ethanol 0.794 34.7 115 100 130IPA 0.789 26.6 117 100 70TBA 0.791 21.6 100 90 65MTBE 0.744 18.2 110 100 55ETBE 0.770 15.7 112 100 28TAME 0.770 15.7 105 100 7


Fuel Blending Overview

In refineries, gasoline is made from several refinery streams. Traditionally these were mixedin a tank. The modern practice is to use in-line blending (ie mixing in a pipeline), whicheliminates costly storage and tankage. To the final gasoline is added butane. This raises theRVP level to the limit of the fuel specification.

MTBE and other ethers (TAME, ETBE, DIPE) are compatible with the gasoline blendstreams and can be blended along with the other streams within the refinery.

Water is a common contaminant of streams within refineries and tanks. As well as processcontamination it enters the system by condensation of water vapour in the storage tanks andtanker trucks. Because water is heavier than and substantially insoluble in gasoline, the waterseparates at the bottom of the tank. The water can be drained off and properly sent to a watertreatment unit.

A fully anhydrous blending and distribution system is technically feasible but is veryexpensive and is only used in the transport of chemicals where water contamination is aserious problem or hazard.

Unlike ethers and the hydrocarbon components of gasoline, alcohols are very soluble ormiscible with water.

Traces of water in a gasoline will cause substantially all of any methanol present to separate.This is often referred to as the fungibility problem of methanol. Ethanol is somewhat better,but the presence of water at the bottom of a tank results in a large portion of the ethanolseparating from the gasoline. Propanols (IPA and n-propanol) are better, and separation ofthe butanols is slow and can be handled like ethers.

Because of the problems with ethanol, it is not added within the bounds of the refinery, ratherit is added at the distribution centre, which would supply individual retail outlets. Thisminimises water contamination in the distribution train.

This method is often referred to as splash blending and is often performed in a storage tank ora road tanker. In some cases mixing within lines feeding a tank controls the mixing moreprecisely.

Non-Ideal Behaviour:

Because gasoline hydrocarbons and the lower alcohols (methanol and ethanol) are dissimilar,their mixtures show non-ideal behaviour as far as vapour pressure is concerned. This non-ideal behaviour is well known. Its main consequence is the vapour pressure above anethanol-gasoline blend is higher than would be expected (given a consideration of the pureliquid vapour pressures and the relative concentrations in the mixture).

The consequence is that it is very difficult for ethanol-gasoline mixtures to achieve the soughtafter vapour pressure limits of the proposed gasoline standards, namely 60 kPa maximum inthe summer period for Euro-3 and 55 kPa for Euro-4.


Blending Studies

In order to illustrate the main issues, we have conducted some simple blending estimates forthe oxygenate additives [EXHIBIT 19]. In the first simulation (Table 4) we estimate theproperties of a final gasoline resulting from the addition of oxygenates. The oxygenates wereadded in the volumes that have typically been used in Europe and the USA. The basegasoline had properties similar to the composition of the present Australian pool average.This shows how oxygenates might be used to lift the present gasoline to the 95 RON octanerequirement.

TABLE 4SIMULATION 1

Adding Lower Alcohols to Australian 1998 Pool Gasoline10

Petrol Methanol Ethanol Ethanol IPAVolume % 100 3 5 10 10LHV (MJ/L) 32.68 32.55 33.30 32.63 31.86Oxygen (%wt.) ~0 1.57 1.81 3.61 2.75RON 91.6 92.8 92.8 93.9 94.1MON 82.5 83.0 83.4 84.3 84.3RVP 60.0 78.2 67.8 74.6 61.7

Adding TBA and Ethers to Australian 1998 Pool GasolinePetrol TBA MTBE ETBE TAME

Volume % 100 7 15 15 15LHV11 (MJ/L) 32.68 32.23 31.55 32.0 32.0Oxygen (%wt.) ~0 1.57 2.68 2.38 2.38RON 91.6 92.2 94.4 94.7 93.6MON 82.5 83.0 85.1 85.1 85.6RVP (kPa) 60.0 60.5 59.1 55.0 51.8

Our results show that starting from a typical ULP gasoline with a 92 RON, 95 RON iseffectively achieved using ethers at about 15% by weight. The final gasoline sensitivity(RON - MON) is <10 and the target MON > 85 is achieved. Ethers do not compromise theproposed specification concerning oxygen content (2.7% max.) or RVP (target 60 kPa). Inrespect of RVP, the data illustrate that it may be possible to add additional butane to the finalmixture.

None of the alcohols achieve the target specification. Ethanol and IPA at 10% are the best atapproaching the 95 RON target. However, for ethanol at 10%, the RVP value is well over the60 kPa target and even exceeds 60 kPa at 5%. At 10% ethanol, oxygen is well over the 2.7%limit but the heating value of the fuel is only marginally less than the basestock. Usingalcohols, sensitivity declines slightly and none of the alcohols achieve the 85 MON target.

10RON and MON data for Regular Unleaded Petrol as detailed in �Setting National Fuel Quality Standard�Paper 2, page 51; base gasoline assumed available at RVP 60 kPa.11Lower heating value or net heating value expressed on an energy per unit volume basis.


In a second simulation, we start with the target petrol with 95 RON, a sensitivity of 10, and anRVP of 60 kPa (as required using the Euro-3 standard) and containing the above volumes ofadditive. We then estimate the properties of the basestock when the oxygenate is backed outof the gasoline. This gives a view of the quality of the basestocks required when using thevarious oxygenates. The results are given in Table 5.

TABLE 5SIMULATION 2

Subtracting Alcohols from Euro-3 GasolinePetrol Methanol Ethanol Ethanol IPA

Volume % 100 3 5 10 10Basestock required

RON 95 93.9 93.9 92.8 92.6MON 85 85.9 85.9 84.8 84.6RVP 60 39.8 51.2 41.5 58.0

Subtracting Ethers from 95 Euro-3 GasolinePetrol TBA MTBE ETBE TAME

Volume % 100 7 15 15 7Basestock Required

RON 95 94.6 92.4 92.0 93.2MON 85 86.6 84.4 84.0 85.2RVP (kPa) 60 59.5 61.0 65.9 69.7

This illustrates the superior value of the ethers because the blendstock that is required isgenerally inferior to that required when blending with alcohols. Excepting ethanol and IPA at10% level, the alcohols require a basestock not too different from the Euro-3 target. Ethanolat the 10% level contains oxygen in excess of the Euro-3 target level.

Ethanol Blending

The blending of ethanol has received a considerable amount of attention with respect to theinfluence of the ethanol concentration on the finished gasoline RVP and the distillation curve.Mathematical simulation is difficult because of the non-ideal behaviour of ethanol/gasolinemixtures and complicated interactions with the various components of the gasoline.

Extensive modelling work has been conducted for the Californian Energy Commission byMath Pro. Inc. [EXHIBIT 18]. The work presented data for RVP and distillation curve forCalifornian gasoline. Note this gasoline would have considerably lower aromatics than thoseproposed for Australia under the Euro-3 standards.

The Math Pro Inc. work shows that the actual RVP is dependent on the nature of the gasolineand that the increase in RVP is higher at lower concentrations of ethanol. This confirmsearlier work [EXHIBIT 22, figure 9] that shows a major rise in RVP when up to 5% ethanolis added.


To get a better understanding of this issue we have produced estimates for the RVP at variouslevels of ethanol addition using blendstock of varying RVP; Table 6.

TABLE 6SIMULATION 6

RVP at 5% (vol.) Ethanol into Gasoline (kPa)RVP of base stock gasoline (kPa) 40.0 45.0 50.0 55.0 60.0RVP of final blend (kPa) 50.0 54.5 58.9 63.4 67.8Delta RVP (kPa) 10.0 9.5 8.9 8.4 7.8

Our results indicate that splash blending ethanol causes a bigger increase in RVP the lowerthe RVP of the base stock gasoline. The above table indicates that if we target 60 kPa in thefinal gasoline (Euro-3) then using 5% ethanol we need gasoline basestocks with an RVP of 50kPa or less.

Selecting base gasoline for this duty is a complex procedure but we get some idea of theissues by considering the RVP of some of the streams that might contribute to gasoline.Selected properties of typical refinery streams are given in Table 7.

TABLE 7TYPICAL PROPERTIES OF REFINERY STREAMS

Refinery Stream RVP(kPa)

Olefins(% Vol.)

Aromatics(% Vol.)

RON

Butane 358 0 0 94Light Straight Run 88.2 1.0 3.9 75Isomerate 108.2 0.4 0.9 83FCC gasoline 48.9 29.4 29.3 92Alkylate 53.8 0.5 0.4 93Reformate 31.7 0.7 66.2 99

The table illustrates that to achieve a base gasoline of RVP of 50 kPa or less would requirethe use of major volumes of Reformate and FCC gasoline, both of which are high inaromatics and have a naturally high octane.

A preliminary conclusion is that ethanol may not contribute to octane if an RVP cap of60 kPa applies, because the base gasoline would have very high octane as a consequence of ahigh aromatic and olefin content.

Climate

Australia does not suffer the cold weather drive-ability problems of parts of Europe and USA.The drive-ability issues (volatility) concern hot weather drive-ability and the specificationsfor volatility in hot climatic conditions (summer and northern Australia).


The main problem is with carburettor fitted vehicles. The issue has been extensivelyresearched in Europe [CONCAWE 99/51; EXHIBIT 21]. The report sets out a detailedanalysis of RVP versus the E70 value for the individual countries.

In simple terms, the drive-ability can be classified in terms of Vapour Lock Index (VLI)Where:

VLI = 10 x RVP (kPa) + 7 x E70

RVP is the Reed Vapour PressureE70 is % of fuel distilled at 70C

The VLI should be less than 900 for hot climates.

From the standpoint of oxygenates, the main issue is raising the RVP and minimising thevolume distilled below 70C.

Further analysis of this issue relies on a detailed knowledge of the basestock and is beyondthe scope of this work.

Alcohol and Ethers Emissions profiles

The improvement in emission profile when oxygenates are used in gasoline is well knownand the basis for the US RFG Program. Data is substantial on the use of the additives in awide range of vehicles and conditions. These were reviewed in the earlier study [RMIT].

One of the issues that has arisen in the recent controversy on the use of MTBE is analysis byUniversity of California workers who have suggested that gasoline can be formulated to givethe required air quality benefits without using MTBE (or other oxygenates) [EXHIBIT 24].This view is disputed by several other groups; this will be discussed in more detail when theenvironmental impact of the additives is considered.

Of pertinent interest is the Australian situation with a relatively large number of carburettorfitted vehicles which would use lead replacement petrol.

Braun has presented extensive data on CFR test engines. Full vehicle tests have beenperformed by Repco [BRAUN].

The salient feature of the data is shown in the attached data; Table 8. This shows theemissions profile produced by using various additives on the three petrol formulations givenabove in Table 2. Tests were performed at 600 rpm (typical for determining RON) and 900rpm (typical for determining MON) at fuel rich (air/fuel ratio = 13.5) and a fuel lean (air/fuelratio = 16).

The three petrol types without additive did not differ markedly from each other. Data is givenrelative to the emission without additive.


The general observations were:

• Additive reduced CO emissions and hydrocarbon emissions under lean burning conditions• Under lean burning conditions, hydrocarbon emission depended on the petrol

composition. High aromatics being associated with an increase in the amount ofhydrocarbon emission.

• Nitrogen oxides increase under fuel rich conditions but fall under fuel lean conditions. Asimilar observation is made for aldehydes.

The data reveals there are differences in emissions between the additives. However, theadditives were all used at the same level (10%) and after correcting for oxygen content, theredoes not appear to be much difference between MTBE and ethanol.

This work was extended to include engine tests on multi-cylinder engines. This showed littledifference in the torque developed. One engine showed problems with MTBE additive whichwas judged to be due to an unusual carburettor geometry, this being affected by the lowerviscosity of the fuel containing MTBE (resulting in a richer mixture). In other respects thefull engine tests confirmed the CFR test engine results.

Modern engines fitted with lean burn systems and catalytic converters would substantiallyreduce the noxious gases (unburnt hydrocarbons, nitrogen oxides and carbon monoxide) fromthe tailpipe.

Greenhouse

Focusing on the vehicle greenhouse benefits arise by improving fuel octane and therebyallowing the use of higher compression, more fuel efficient vehicles. The downside is thathigher octane, inevitably requires higher greenhouse emissions in the refinery. This isdiscussed elsewhere.

From the standpoint of the additives themselves ethers and alcohols, other than ethanol, areproduced by energy intensive processes and result in considerable greenhouse emissions. Asa very rough guide, based on process thermal efficiencies, each tonne of additive producedwill cause a tonne of carbon dioxide emission.

From the standpoint of Australia (and Europe) most of the additives will be produced incountries that are not signatories to the main Kyoto protocols (eg Saudi Arabia) and so theseemissions would not count to the overall emission levels. Thus boosting octane by usingimported additives may help Australia (and Europe) achieve its Kyoto commitments becausethis action will require less intensive operations within the nations refineries.

Ethanol can be produced by petrochemical processes or from biomass. For the most part weare concerned with biomass produced ethanol. Proponents claim the use of bio-ethanolproduces significant greenhouse savings because the resource is renewable.


TABLE 8CHANGES IN EXHAUST EMISSIONS AT 10% ADDITIONRELATIVE TO PETROL WITHOUT ADDITIVE [BRAUN]

%CO %O2 %CO2 %CO2 HCppm HCppm NOx ppm Aldehyde(ppm)A/F ratio 13.5 16 13.5 16 13.5 16 13.5 16 13.5 16

Petrol A600 RPM MTBE -0.6 +0.4 +0.4 -0.4 -169 +165 +443 -277 0.0 -0.16Methanol -1.8 +0.2 +1.1 -0.3 -410 +148 +1548 -73 +1.43 -0.55Ethanol -1.3 +0.7 +0.8 -0.6 -278 +100 +1048 -573 +0.93 -0.25TBA -0.9 +0.3 +0.5 -0.3 -133 +845 +707 -229 +0.33 -0.09Toluene -0.3 +0.2 +0.3 -0.1 n +238 +161 +50 +0.10 -0.09900 RPMMTBE -0.6 +0.3 +0.3 -0.3 -49 -48 +1023 -180 +0.65 +0.03Methanol -1.9 +0.9 +1.1 -0.7 -304 +125 +660 -771 +2.30 +0.22Ethanol -1.2 +0.6 +0.7 -0.5 -196 -20 +594 -566 +1.33 +0.21TBA -0.8 +0.3 +0.4 -0.3 -122 -28 +558 -246 n +0.35Toluene -0.3 +0.1 +0.4 -0.1 -102 +25 +170 +49 +0.81 -0.04

Petrol B600 RPMMTBE -0.6 +0.5 +0.28 -0.35 n +743 +323 -291 n -0.15Methanol -1.8 +1.0 +1.11 -0.65 -362 +33 +1556 -742 +2.4 +0.08Ethanol -1.1 +0.7 +0.55 -0.45 -84 -3 +740 -561 +1.7 +0.13TBA -0.8 +0.4 +0.42 -0.25 n -10 +557 -234 +2.4 -0.16Toluene -0.2 +0.2 +0.27 -0.15 n +51 +239 +37 +1.9 +0.11900 RPMMTBE -0.6 +0.6 -0.5 +13 +344 -315 n -0.10Methanol -1.8 +1.0 -0.7 +28 +157 -544 +0.8 -0.03Ethanol -1.3 +0.6 -0.5 +40 +1128 -364 +1.1 +0.03TBA -0.7 +0.4 -0.2 +33 +298 -134 -0.7 -0.03Toluene -0.2 +0.2 0.0 +18 +106 -3 n -0.06

Petrol C

600 RPMMTBE -0.5 +0.3 +0.3 -0.3 n -24 +299 -295 +0.40 -0.07Methanol -1.9 +1.1 +1.2 -1.0 n -6 +1463 -246 +1.80 +0.10Ethanol -1.2 +0.7 +0.6 -0.7 n -74 +829 -762 +1.70 -0.03TBA -0.8 +0.4 +0.4 -0.4 n -2 +445 -442 n +0.01Toluene -0.2 +0.2 +0.2 -0.1 n +61 +87 -66 n +0.04900 RPMMTBE -0.7 +0.6 +0.4 -0.4 n -51 +305 -201 +0.97 +0.01Methanol -1.2 +0.9 +1.3 -0.8 -201 -3 +1567 -304 +1.06 -0.09Ethanol -1.3 +0.6 +0.8 -0.4 -211 -6 +838 -233 +1.00 -0.01TBA -0.8 +0.4 +0.4 -0.3 n -33 +500 -208 n +0.07Toluene -0.4 +0.2 +0.4 0.0 -322 +77 +260 +70 -0.77 +0.10


Ferrocene

Ferrocene additive is available as the additive PLUTOcen(R) by Associated Octel. Technicalliterature provided by Octel [EXHIBIT 27] show the additive at 30 ppm to have a dramaticeffect on low octane basestocks. With a base of 80 RON an octane gain of 2 is achieved.There is a slightly less impact on the MON. However, with a base of 90 RON, the octanegain is 1.6, but the MON gain is only about 0.8.

Octel present comparative data against MMT. This demonstrates its higher efficacy from thestandpoint of metal content, but a lower efficacy towards the MON of the basestock.

The impact of gasoline hydrocarbon composition on the efficacy of the additive is not given.

Emissions Performance

Octel state that field performance trials substantiate all of the marketing claims. This data isavailable on a confidential basis and has not been pursued at this stage.

Impact on Catalysts

Octel data indicates that there is no reduction in the efficiency of sensors or catalysts.Catalysts equipped vehicles show catalyst efficiency is maintained (ie protects the catalystsagainst aging). However, there is a small decrease in the conversion efficiency of nitrogenoxides at low mileage (<60,000 km).

Impact on Spark Plug Fouling and On-Board Diagnostics,

Octel technical data refutes the belief that this additive is erosive. Extensive tests have shownno detrimental damage to any engine part [EXHIBIT 28].

MMT

The use of MMT as an octane booster has been studied extensively for 30 years with about 20years of �on road� experience with the additive.

MMT is produced by Ethyl Corporation and is available as a proprietary additive HiTEC®

3000. Ethyl have provided a substantial amount of documentation to this Study describingmany aspects of MMT [EXHIBITS 1,2 AND 25].

Efficacy

MMT is used in very low quantities, typically 18 mg Mn/L. Correlation curves for theadditive for different fuel blendstocks are known.

MMT produces an octane gain according to the following equations [RMIT 1994]:

RON Gain = 0.0615(Mn 0.5){42.75 - 0.3868(RON) - 0.02168(A)]


MON Gain = 0.01527(Mn 0.75){43.04 - 0.3868(MON)] -0.003788(Mn)[0.06075(A) + 0.6409(SENS)]

Where:

RON = Research Octane Number (lead free)MON = Motor Octane Number (lead free)SENS = Sensitivity (RON - MON)A = Volume percent aromaticsMn = Manganese concentration mgMn/L

Application of these equations to the average basestock for the Australian gasoline pool(Octane 91.6 RON) shows that MMT at 18 mg Mn/L will lift RON by about 1.5 and MON byabout 0.5. Thus, MMT cannot of itself be used to raise the octane to the Euro-3 level (95RON).

However, MMT is not sensitive to the presence of materials other than aromatics (ie.alcohols, ethers) and MMT could find a role in trimming gasoline blends, which may containoxygenates in order to ensure the minimum value of octane is obtained.

Emissions Performance

Emissions tests on the use of MMT indicated the following effects on tail pipe emissions[EXHIBIT 1]:

• A small fall in the amount of carbon monoxide (CO) emitted.• A more substantial fall in the level of nitrogen oxides emitted.• No evidence for an increase or decrease in the amount of unburnt hydrocarbons emitted.• Evidence of a reduction in other toxic gases (formaldehyde, acetaldehyde and benzene) as

a consequence of allowing refiners to optimise blending.

MMT has an impact on lowering global carbon dioxide emission by improving refineryefficiency and hence internal fuel use. This could be as much as 3 or 4 %. Further the lowernitrogen oxides of the tail-pipe emissions has an effect on lowering nitrous oxide emissions (amajor greenhouse gas).

Impact on Catalysts

Ethyl Corporation claims [EXHIBITS 1 & 2, supported by Ford SAE 821193 in EXHIBIT 25item 2] that MMT maintains significantly higher catalyst conversion efficiency over the lifeof the catalyst converter.

The mode of action seems to be by protecting the catalyst against the slow degradation andpoisoning by other components such as phosphorus and zinc. This is the complete contrast tolead, which irreversibly poisons catalysts.


Valve Seat Recession

Higher than normal use of MMT (>0.018 mg Mn/L) provides protection from wear of softexhaust valve seats (valve seat recession). This is a particular problem for cars designed tooperate with leaded petrol.

The UK and French governments have approved MMT for VSR applications. It has beenextensively used in California for this use12.

From discussions with the industry, MMT is not used in Australia as an additive to producelead replacement petrol nor is it present in VSR additives currently available here.

Impact on Spark Plug Fouling and On-Board Diagnostics

Ethyl Corporation disputes early reports that MMT can cause spark plug fouling andinterferes with onboard diagnostics [EXHIBITS 1 and 3].

Automotive Finishes and Parts

One of the main concern of the auto makers is the impact of gasoline additives on finishes(paint, varnishes, vinyl etc.) and engine parts (rubber hoses, metal components etc.). There isa paucity of information on this problem.

A 1988 American Petroleum Institute publication [No. 4261); EXHIBIT 22] reviews theeffects of the additives on plastics and rubbers. When blended at the 10% level with gasolinethe additives cause elastomers (rubbers) to swell. The salient details are given in Table 9:

TABLE 9IMPACT OF ADDITIVES ON ELASTOMERS

Volume % Swell, After 72h Immersion10% additive in gasoline (30% aromatics)

Elastomer gasoline methanol ethanol MTBEFKM (fluorocarbon) 0 27 3 2Polyester urethane 11 42 37 13Fluorosilicone 14 21 18 -Acrylonitrile/butadiene 34 53 51 34Polyacrylate 44 112 136 -Chlorosulphon. polyethylene 49 41 56 48EPDM 137 109 124 139Natural Rubber 169 148 176 -

This data illustrates the advantages of MTBE when compared to methanol and ethanol.

12[EXHIBIT 1; EXHIBIT 25 details the state of regulatory approvals in US, Europe, China, Canada Russia andArgentina].


There is almost universal agreement that methanol is not a favoured additive for the generalvehicle fleet13. The main concern is the ability of the additive to act as a solvent. However,irrespective of solvent powers, methanol is known to corrode (ie. react with) certain metalshigh in the electrochemical series (zinc, aluminium and in particular titanium). Anycomponent containing these elements would be potentially attacked by methanol.

There is some concern that ethanol blends may promote rusting of gasoline tanks and anti-rust additives have been proposed.

Gasoline contains hydrocarbons of generally low solvating power. When considering theimpact on paints and parts, the question is how far the additives differ from gasolinehydrocarbons.

Solvent interactions are complex and a full analysis is beyond the scope of this review. Herewe present a simple view using the solubility parameter (SP, which is dependent onfundamental thermodynamic properties of the solvent) and fractional polarity (FP, which isdependent on the ionisation constant, dielectric constant and polarizability). The further theadditives depart from the values of hydrocarbons, the more likely a solvent issue is likely toarise; Table 10

TABLE 10SOLUBILITY PARAMETER AND FRACTIONAL POLARITY OF SOME ADDITIVES

SP FPhexane 7.3 0toluene 8.9 0.001methanol 14.5 0.388ethanol 13.2 0.296n-propanol 11.9 0.152IPA 11.5 0.178butanols ~11 ~0.1ethers ~10 ~0.1Aggressive Solventsacetone 10 0.695nitromethane 12.6 0.780

This table illustrates that the additives would have greater solvating power than hydrocarbons.Of most concern would be methanol and ethanol. It has been suggested that automotivefinishes can be affected, especially on older cars with lacquer finishes, with ethanolconcentration >20%. This is well out of the range being considered for the new standards.Further, there is long history of use of ethanol at the 10% level in Australia with no apparentproblems. Elsewhere there is a long history of use with the other additives underconsideration

We conclude that there will not be a problem with oxygenates causing problems withautomotive finishes and fixtures.

13Methanol fuel vehicles are specially made for that fuel.


MMT

MMT is a hydrocarbon soluble liquid, insoluble in water, and it would be expected to havesimilar solvating powers to the main gasoline hydrocarbons. Further, it is only used in partsper million amounts. It is generally introduced diluted in hydrocarbons (naphtha). We wouldconclude that there would be no problems with MMT from the standpoint of attackingautomotive finishes.

Ferrocene

Ferrocene is slightly soluble in water (6.3 mg/L), but used in hydrocarbons in the ppm level.We would not expect any problems with the use of this additive on automotive finishes.

Automotive Industry Views

The automotive industries views are expressed in the World-Wide Fuels Charter (WWFC)[EXHIBIT 23]. In essence the WWFC expresses the opinion that ash-forming additives,MMT and ferrocene, are to be avoided because of perceived detrimental effects on the engineand ancillary systems.

As far as oxygenates are concerned, MTBE and ethanol (with restrictions) are acceptable.


FINANCIAL COSTS OF THE ADDITIVES

Background

Gasoline is an important and major traded commodity. There are three principal marketsfrom which all other local markets take their lead - US Gulf, Rotterdam and Singapore. Atany instant there are large volumes of gasoline at sea or in storage. Using this fluidity,extensive real-time spot market trading ensures that the price differentials between the majormarkets are minimised. Thus a sudden demand and price rise in one market is rapidlysatisfied by products supplied from another market that in turn results in price rises in thesupplying markets.

Gasoline is not traded as final product rather as blend stocks. This facilitates the safehandling and transport by having a low vapour pressure. The final blender (gasolinewholesaler) adds butane to boost the vapour pressure (RVP) to the allowable limit14.

Blend stocks are supplied with a range of properties, but for sales purposes all product iscorrected to the same density. The major characteristic is the octane value (RON clear15) ofthe blend stock. The sales of gasoline in the major markets is so large that the blend stock isavailable and sold over a wide range of octane numbers (typically from 87 RON to over 100RON), although only the value of the higher volume grades are often reported16.

For example the Singapore averaged market quotes for 21 March 2000 (Petroleum Argus)

97 RON 30.15 US$/bbl95 RON 29.65 US$/bbl92 RON 28.95 US$/bbl

In considering the value of octane boosters we are concerned with the differential between thegrades of octane blend stock rather than the absolute value - which rises and falls with theprice of crude oil. The above figures illustrates that on this day there was a differential of 0.7US$/bbl between the 92 and 95 RON grades and a differential of 0.5 US$/bbl between 97RON and 95 RON. Thus from the standpoint of octane, the differential rises with increasingoctane.

In fact the recent oil price volatility has reduced these differentials and it is often found thatthe differentials are 97 - 95 ~ 1 US$/bbl and 95 - 92 ~ 0.5 US$/bbl.

There is a marked cost penalty going over 95 RON. This is a consequence of the economicsof operation of reformers, which principally increase the octane of the blend stocks by

14Plus proprietary additive packages.15Clear indicates lead free.16Examples of the main reporting agencies are Standard & Poor�s Platts, Reuters, Argus. Such agencies provideelectronic and hard copy market summaries.


increasing the level of aromatics. High severity reforming which produces octane numbersover 95 RON have the consequence of large gas generation (waste) in the reformer.

We thus see that the �price of octane� is typically 0.16 US$/bbl to about 95 RON and about0.5 US$/bbl over 95 RON.

Chemical Markets

For the larger volume chemicals (methanol, ethanol, BTX) there are well-established spotmarkets from which markets of minor commodities take their lead. However, in contrast tooil markets, a major part of production is sold on contract.

Shipping

Gasoline and chemicals are regarded as clean cargoes. There is a large dedicated tanker fleet.Gasoline is often shipped in relatively large carriers (80,000 tonne parcels), whilst chemicalssuch as methanol are shipped in multi-tank vessels in parcels of 2000 to 10,000 tonnes.

Shipping costs are complex and are a function of the size of the ship, the state of the shippingmarket, geographic distance and location and the possibility of a back-haul cargo.

As a rule of thumb the cost of moving oxygenates into or out of Australia would be expectedto be in the region of US$ 30/t. The cost of shipping a somewhat larger parcel of gasolinemight be about US$ 15/t (c. $ 2/bbl). From the standpoint of shipping costs, there would thusbe an incentive to import the oxygenate already blended into a gasoline basestock.

Methanol

Methanol is a widely traded commodity chemical. Chemical prices are not directly related tothe prevailing price of crude oil or oil derivatives such as gasoline.

Chemical prices show pronounced variations based on business cycles. Thus although theprice of methanol can range between US$ 80/tonne and sometimes over US$ 300/tonne, thelong term average is about US$ 135/tonne.

At a notional exchange rate of A$ = 0.6 US$ this average value is about A$ 18 c/L.

Supply

Nowadays, most methanol is made from natural gas. The production of methanol demandslarge volumes and large exporting plants have been constructed at locations where low pricegas is available.

World capacity is 33.6 Mt/a. Most plants service a specific market, with the trade beingdominated by a relatively small number of world-scale plants.

Australian production

There is a small methanol plant at Laverton in Victoria supplying the local demand (ca. 160t/d). World-scale methanol plants have capacities of over 2000 t/d. There have been


proposals (there are two currently active to the knowledge of the author), to establish worldscale operations in northern Australia.

Ethanol

Traded Prices in Ethanol

Ethanol is extensively traded in the US with the price reported by specialist reportingagencies. Because fuel ethanol is used as a gasoline extender, the price varies with theprevailing price of gasoline.

Tax Incentives for Ethanol [EXHIBIT 12]

Ethanol in the US is subsidised by the Federal Government. The subsidy is paid mainly to thesellers of gasoline. Each gallon of ethanol that is blended results in a US$ 0.54 tax credit.This credit can be claimed either as an income tax credit or as an excise exemption. A caveaton the subsidy is that the ethanol must be made from biomass not fossil fuels.

ETBE is regarded as using ethanol and receives a tax exemption based on the volumeequivalent of ethanol

These tax incentives are aimed at making ethanol price competitive with gasoline and MTBE.At a present notional exchange rate of A$ = 0.6 US$, this subsidy is equivalent to A$ 0.238/L(ie about 24 c/L or about A$ 190/t).

In Australia, fuel ethanol is excise free, which is equivalent to a tax benefit of about 45cents/litre.

Supply

Ethanol can be made from either petrochemicals or from biomass. Total production is about24 Mt/a (32,000 ML/a, 560,000 bbl/d). North America and Brazil dominate fuel ethanolproduction. In the US the capacity is 107,000 bbl/d from biomass (mainly corn) and 13,000bbl/d from petrochemicals. Brazilian capacity is around 260,000 bbl/d. Other centres ofproduction are France (8,000 bbl/d), Canada 2,700 bbl/d). The Far East has a capacity ofabout 90,000 bbl/d mainly in China and India.

Ethanol in Australia

Total annual production is about 160 ML (ca. 2760 bbl/d)17. There are three main plants:

Manildra Group currently produces 70 ML with plans to expand to 100 ML in 2000.CSR Distillers currently produce 50 ML, of which about 60% is exported.Rocky Point produces 8.10 ML.

The 160ML annual production is less than 1% of Australian gasoline demand (18,033 ML).To the oxygen limit of the Euro-3 standard (2.7% oxygen; 7.8% ethanol) an annualproduction of 1320ML ethanol would be required. 17Data provided by Fuel Ethanol Association of Australia.


Demand

World demand is about 486,000 bbl/d or about 87% of world capacity. Given plant outagesetc. this indicates that supply demand is approximately in balance.

The dominant user is Brazil where ethanol is used in all gasoline sold. The demand is about220,000 bbl/d. This demand is satisfied by the nations own production and none is availablefor export.

The next largest use is for industrial uses (solvent etc.) followed by the demand for fuelethanol and as a fuel additive in the USA. Beverage use accounts for the rest.

MTBE

MTBE is widely traded on the US and European fuel and chemical spot markets. TrackingMTBE prices reveals that MTBE is linked to the prevailing price of regular gasoline with apremium of about 15%.

Production

The production of MTBE involves the facile reaction of methanol with isobutene. Methanolis a world commodity chemical readily available (see above). The main issue is theavailability of isobutene. There are three main sources:

The refinery operation of fluid catalytic cracking (FCC) produces a byproduct gas stream thatcontains isobutene. This stream is often fed to an MTBE unit where the isobutene in thestream preferentially reacts and is converted to MTBE. After purchasing methanol, this givesthe refiner a ready source of MTBE within the refinery boundary.

A more substantial source of isobutene is the C4 cracked gas stream from pyrolysis crackingof gas oil or naphtha to produce ethylene. This stream contains a substantial volume (up to50%) of the valuable commodity 1,3-butadiene and this extracted for further use. Afterbutadiene extraction, the residual stream contains a major portion (up to 50%) of isobutenethat can be converted into MTBE. This is a major source of traded MTBE.

Isobutene can be made from LPG. This requires the isomerisation of normal butane toisobutane followed by dehydrogenation to produce isobutene. This route is energy intensiveand has high capital and operating costs. However, there are very large plants producingMTBE using this route. These plants are based in the Middle East and Canada and exportMTBE to Europe, the USA and the Far East.

Supply

World capacity is about 21 Mt/a (522,000 bbl/d) with a further 7 Mt/a (172,000 bbl/d) eitherunder construction or in planning. Nearly 50% of the total is in North America.

Other major producers are in Europe and the Middle East. Many of the larger plants in theworld export to the USA.


Demand

World demand is about 390,000 bbl/d, this is about 75% of nameplate capacity and given thenumber of plants under construction or planned clearly represents an excess of capacity.

US MTBE demand is about 250,000 bbl/d which is excess of its production and there is aconsiderable import

Clearly MTBE phase-out in the USA will have a major impact on the MTBE market aroundthe world.

Other Oxygenates

Of the other oxygenates only ETBE, TAME and TBA are produced in significant volumes.These materials are produced internally within refineries and petrochemical plants.

ETBE can be produced in the same plant as MTBE (3.7 Mt/a, 91,000 bbl/d). Many of thenewer refinery based plants can swing production between ETBE or MTBE (80,000 bbl/d).Another 10,000 bbl/d ETBE is produced in France.

TAME capacity is about 2 Mt/a (47,000 bbl/d). TAME is produced in the refineries using theC5 olefine stream from FCC operations (iso-amylene stream). Unlike isobutene there are noother significant sources other than FCC off-gas and the production of TAME is limited.Plants that produce MTBE cannot easily be converted to produce TAME. However, there aresome flexible MTBE/TAME plants in Russia.

TBA capacity is about 2.6 Mt/a (60,000 bbl/d). TBA is produced mainly in the USA andEurope where it has some uses as petrochemical intermediate and solvent. Isobutene is againthe key precursor, which is reacted with water to produce the alcohol.

This data clearly indicates the dominance of MTBE and ethanol as oxygenates and octaneboosters.

Implication of Californian and US Ban on MTBE

A ban or phase-out of MTBE would have a major impact on the supply and availability ofoxygenated additives to Australia. Because of the dominance of the US position, a US orCalifornian ban on MTBE would exacerbate the over-capacity already existing in the industryand result in a fall in MTBE price.

In the Asia region, because of the presence of low cost producers, this may result in MTBEfalling below the price of gasoline. Such an event would have the consequence on pressure toimport and use MTBE in Australia, irrespective of the need for an oxygen booster or addedoxygen.

An MTBE ban would have a major impact on the trade in other additives. Almost certainlythe trade in TAME, ETBE, and possibly DIPE, would be interrupted because of theirsimilarity to MTBE.


At present it is uncertain if the US will persist with an oxygen requirement in the RFGgasoline pool. (The Blue Ribbon Panel, see below, has recommended that the oxygen contentregulation should be waived.).

Irrespective of an oxygenate waiver, a US led MTBE ban is likely to cause an increase indemand (hence price) of good quality blendstock such as alkylate.

If the US persists with the oxygen requirement, this will create an enormous increaseddemand for ethanol. This US RFG market would set the world price for ethanol. Purvin &Gurtz, Inc. and ESAI have, extensively addressed these issues and several future scenarios,for the US for the California Energy Commission [EXHIBIT 17 and EXHIBIT 26]. Adetailed financial analysis was performed by ESAI for the US markets [EXHIBIT 13], whichattempted a comprehensive review of the supply, availability and price of alternativeoxygenates in the event of a California and a US wide ban.

Several supply/cost curves at different scenarios were developed. Using the notional value ofA$=0.6 US$, produces the estimates shown in Table 11:

TABLE 11

Prices for Oxygenates Delivered to California (Intermediate Term; from EXHIBIT 13)

California Ban on MTBE US Wide Ban on MTBEUS c/gal A c/L US c/gal A c/L

Gasoline (basis) 69.6 30.7 69.6 30.7MTBE (1997) 94.5 41.6 94.5 41.6Ethanol 160.8 70.8 171.6 75.6TBA 98.7 43.5 91.3 40.2ETBE 112.2 49.4 109.3 48.1TAME 104.7 46.1 100.1 44.1methanol (for reference) 17.9 17.9

For the longer term these values may fall.

For Australia these supply/costs curves would be different. It would be expected that thesources for ethanol and ethers would be different. For instance there may be indigenous andFar East supplies for ethanol and TAME may best be sourced from Europe. This analysisshould be repeated for an Australian scenario but the data presented here will give a ballparkestimate.

Referencing the cost to gasoline, we see that the cheapest oxygenate is MTBE and the mostexpensive oxygenate is ethanol. The cost implication of this for the blender is modified afterconsideration of the different volumes of additive to be used to achieve a specific oxygenlevel in the gasoline.


Trade in Gasoline Components (BTX, Alkylate)

Benzene toluene and xylene are heavily traded on the Far East Asian chemical markets.There are significant differentials between the countries of SE Asia, which reflect the cost ofshipping from the countries of production (Taiwan, Singapore, Korea, and Japan).

Benzene and xylenes are highly sought after intermediates for the production of syntheticfibres. Prices depend on the business cycle, with the floor price being determined by thevalue as octane boosters in gasoline (ie. floor price typically gasoline plus c. 20%). Toluenehas no large direct uses in the chemical industry and the prevailing price tends to be near tothat of 15% plus the price of gasoline.

At present there is no substantial trade in alkylate.

Costs of MMT and Ferrocene

MMT and ferrocene additives are priced according to the effect they produce, ie the boostingof octane. The price is determined so that the additive is cost competitive to an alternativeoption such as the addition of toluene. The detailed pricing structure is not available.


ENVIRONMENTAL AND HEALTH EFFECTS OF ADDITIVES

Background

The RMIT Study presented an analysis of the toxicity of petrol additives and emissionproducts (Study 5 of RMIT 1994). This reported extensively on the toxicity of the purematerials as known at the time18.

A generalised conclusion of the earlier study would say that the additives were less toxic thanthe products (ie. petrol, which contains benzene). However, it must be emphasised that thisgeneralisation may not be correct because it ignores synergism between the petrolconstituents and the additives. This may result in a product of higher toxicity. Nevertheless,it would appear to be a useful hypothesis pending toxicity data on additive/petrol mixtures.

We have reviewed the literature from 1994 to the present. With the coming of the Internet,and the widespread interest in environmental pollutants, there is a mass of informationavailable. We have found no information that would significantly alter the 1994 conclusionsabout the health and environmental effects of the additives, other than with respect to waterpollution by MTBE which is discussed below.

One web based organisation Environmental Defense Fund (EDF) produces a database whichcollates all of the information of chemicals as available from the various US governmentagencies and other reliable sources. The data is extensively referenced. The product is calledScorecard and is available @ www.scorecard.org [Downloads are presented as EXHIBIT 9].

This site seems to have semi-official sanction with links to it from government sites such asthe EPA site19 and private organisations such as the American Methanol Institute. However,it should be noted that this private organisation does not appear to be subject to independentassessment such as scientific peer review20

Scorecard data is used to overview the information on the toxicity of the octane enhancers.Scorecard profiles on the chemicals of interest are presented [EXHIBIT 10].

Another useful data source is Spectrum Laboratories Inc (@ www.speclab.com) which is aprivate analytical laboratory concerned with analysis air and water. The site contains usefuldata tables on a range of chemicals found in air and water pollution studies.

Possibly the greatest concern to the general public is their exposure to carcinogens. The mostcomprehensive list available appears to be the list compiled by the State of California

18 Since 1994 there has been further work reported on the principal octane boosters. Further, this Report detailsother compounds, which were not subject to the 1994 review. Updating the earlier work to cover all publishedpapers on the compounds of interest was considered beyond the scope of this review.19Web address: http://www.epa.gov20 Another site which is widely regarded is the International Program on Chemical Safety:http://www.who.int/pcs/pubs/


Environment Protection Agency [EXHIBIT 11]. The only pertinent compound on this list isbenzene.

Another major concern is reproductive toxicity [also included in EXHIBIT 11]. On this list isbenzene and toluene. However, as a cautionary note on the interpretation of these lists, thislist also contains Aspirin and Ethyl Alcohol (in beverages).

Hazard Classification (NOHSC)

The National Occupational Health and Safety Commission (NOHSC) classify the hazardousnature of materials. The NOHSC (Worksafe Australia) exposure standards are also availablefor some of the additives. Ethanol, MTBE, TAME, ETBE, ETAE, Ferrocene have no OHSCclassification [NOHSC].

NICNAS and AICS

In Australia, the Commonwealth Department of Employment, Workplace Relations andSmall Business oversees the National Industrial Chemical Notification and AssessmentScheme (NICNAS). NICNAS was established in 1990 under the Industrial Chemicals(Notification and Assessment) Act 1989 to aid in the protection of people at work, the publicand the environment from the harmful effects of industrial chemicals by assessing the risksassociated with these chemicals. Searching of the NICNAS database can be performed byCAS number. Although there is some overlap with the Scorecard data, there are somedifferences and pieces of additional information.

The Australian Inventory of Chemical Substances (AICS) lists the substances that that do notrequire notification as new chemicals to NICNAS.

NICNAS data on the chemicals is given in EXHIBIT 16.

Methanol (CAS 67-56-1)

NOHSC

Physico-chemical: F (Flammable); Risk: R11 (Highly Flammable)Health: T (Toxic);Risk: R23/25 (Toxic by inhalation and if swallowed);Safety: 1/2 (Keep locked up and out of the reach of children), 7 (Keep container tightlyclosed),16 (Keep away from sources of ignition), 24 (Avoid contact with skin), 45 (In case ofaccident or if you feel unwell, seek medical advice immediately).Cut-Offs: Concentration ≥ 20%; T (Toxic); Risk: R23/25 (Toxic by inhalation and ifswallowed)Concentration < 20% and ≥ 3%; Xn (Harmful); Risk: R20/22 (Harmful by inhalation)Environmental: Risk phrases not assigned.

TWA: 200 ppm or 262 mg/m3


STEL: 250 ppm or 328 mg/m3

Carcinogen category: not categorisedComment: Absorption through the skin may be a significant source of exposure

NICNAS

The chemical is on the AICS. No other information is held.

Human Hazards - Scorecard

Scorecard reports the:

Inhalation cancer risk not recognisedInhalation risk value 10,000 (ug/m3)US air quality standard not coveredIngestion cancer risk not recognisedIngestion risk 0.5 mg/kg/dayUS water quality standard not covered

Scorecard reports no recognised health hazard. Scorecard reports methanol is suspected asbeing a:

� Developmental Toxicant� Gastrointestinal or Liver Toxicant� Neurotoxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant

The Fate of Methanol in the Environment

Because of blending problems with gasoline, methanol is unlikely to be a preferred additiveto gasoline in Australia. Nevertheless, this alcohol is used as an alternative fuel and additivein California.

Further there is a considerable trade and industry in methanol and methanol derivatives andthe toxicity and environmental fate is of interest to a range of organisations. The AmericanMethanol Institute, which actively promotes the use of methanol as an alternative fuel, hascommissioned a major analysis of the fate of methanol in the environment [EXHIBIT 8].

This reports that the half-life for methanol in soil, surface water and ground water is 1 to 7days and the half-life in air is between 3 and 30 days.

Because methanol and ethanol compete in the US market as alternative fuels, some of thedata presented concerns the comparison of methanol, ethanol and benzene in the environment(eg comparison of rate constants for anaerobic and aerobic degradation, Table 3-2 ofEXHIBIT 8). This data has been subsequently used in information relating to ethanol�senvironmental fate presented to the Blue Ribbon Panel on MTBE (see below).


Ethanol (CAS 64-17-5)NICNAS

The chemical is on the AICS.

An article concerning a request by the Governor of Illinios to the US EPA to delay theimplementation of Phase II of the RFG program until the role of ethanol is clarified.


Scorecard has no information on risk values for ethanol. Scorecard reports no recognisedhealth hazard.

Scorecard reports ethanol is suspected as being a:

� Carcinogen� Cardiovascular or Blood Toxicant� Developmental Toxicant� Endocrine Toxicant� Gastrointestinal or Liver Toxicant� Neurotoxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant

The Fate of Ethanol in the Environment

During its deliberations, Kavanaugh and Stocking [EXHIBIT 7] presented the Blue RibbonPanel (see below MTBE) with data concerning the fate of ethanol as a gasoline additive in theenvironment. They state that the fate and transport of ethanol in the environment is wellunderstood, but the interaction between ethanol and other gasoline constituents is not clear.

Ethanol is miscible with water in contrast to ether additives. Although ethanol has a lowvapour pressure in the pure state (lower than MTBE) it shows marked deviations from idealbehaviour and has a much higher effective vapour pressure when used in gasoline blends(RVP 18 psi compared to MTBE 8 psi; see above blending study results; page 27). Thisgives ethanol a greater tendency to volatilise from gasoline.

By contrast Ethanol�s very low Henry�s Law Constant means that evaporation from surfacewater and off-gassing from ground water is unlikely. This is in contrast to other additives andcomponents of gasoline.

The rate of migration in groundwater is indicated by the octanol/water partition coefficient.Ethanol is not adsorbed by soil particles and as a consequence will move at similar speeds toground water.


Although at high concentrations ethanol is toxic to microbes, it is expected to biodegraderapidly in ground waters. Estimates of the order of biodegradability are in the order(approximate half lives are given in parenthesis)21

Ethanol (4.1 days) > Benzene (22 days) > MTBE (>120 days)

As ethanol use becomes a more widespread alternative to MTBE, there is now concern inCalifornia that water supplies are being contaminated by ethanol from gasoline (Oxy-FuelNews, May 15, 2000). Such a situation may arise in Australia if ethanol is added here withoutproper management of gasoline storage facilities

Co-Solvency and Benzene, Toluene, Ethylbenzene, Xylene (BTEX) Plumes.

One of the key issues with ethanol is the co-solvency effect with BTEX. This results in therelatively insoluble BTEX increasing in solubility in groundwater containing ethanol. Inother words ethanol mobilises BTEX.

A further problem is that bacteria preferentially attack ethanol reducing the biodegradationrate of BTEX. This results in BTEX plumes resulting from gasoline spills extending formuch further than would otherwise be predicted (estimates by 25 to 40% or in the order of30m) from leaking tanks.

TBA (CAS 75-65-0)

The US NTP reports positive results in carcinogenicity bioassays in animals, however, TBAis not recognised as a human carcinogen.

NOHSC

Physico-chemical: F (Flammable); Risk: R11 (Highly Flammable)Health: Xn (Harmful);Risk: R20; (Harmful by inhalation)Safety: 2 (Keep out of the reach of children), 9 (Keep container in a well-ventilated place), 16(Keep away from sources of ignition)Cut-Offs: Concentration ≥ 25%; Xn (Harmful); Risk: R20 (Harmful by inhalation)Environmental: Risk phrases not assigned.

Exposure standards not established

NICNAS

The chemical is on the AICS.

This chemical is on the current list for possible assessment as a priority existing chemical (iethere are some concerns with its use).

21 These were estimated from the graphical data of the first order rate constants for biodegradation in thesubmission by Kavanaugh to the Blue Ribbon Panel EXHIBIT 7.


Human Health Hazard


Inhalation cancer risk not recognisedInhalation risk value data gapUS air quality standard not coveredIngestion cancer risk not recognisedIngestion risk 0.1 mg/kg/dayUS water quality standard not covered

Scorecard reports no recognised health hazard. Scorecard reports TBA is suspected as beinga:

� Development Toxicant� Kidney Toxicant� Neurotoxicant

The Fate of TBA in the EnvironmentTBA is a primary metabolite of MTBE and is also found in commercial MTBE supplies.TBA is infinitely soluble in water (miscible) and difficult to biodegrade [OSTP 1997 andSTEFFAN]

Other Alcohols

IPA (CAS 67-63-0)

NOHSC

No hazard classification



Carcinogen category: not categorised

NICNAS

The chemical is on the AICS. No other information held.



Inhalation cancer risk not recognisedInhalation risk value 7000 (ug/m3)US air quality standard not coveredIngestion cancer risk not recognisedIngestion risk data gapUS water quality standard not covered


Scorecard reports no recognised health hazard. Scorecard reports isopropanol (IPA) issuspected as being a:

� Cardiovascular or Blood Toxicant� Gastrointestinal or Liver Toxicant� Kidney Toxicant� Neurotoxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant

The Fate of IPA in the Environment

No pertinent data is available. However, as a secondary alcohol, IPA is likely to degradeslower than ethanol (a primary alcohol) but faster than TBA (a tertiary alcohol).

n-Propanol (CAS 71-23-8)

NOHSCNo hazard classification



Carcinogen category: not categorisedComment: Absorption through the skin may be a significant source of exposure

NICNAS



Scorecard does not report any risk factors for n-propanol.

Scorecard reports no recognised health hazard. Scorecard reports n-propanol (n-propylalcohol) is suspected as being a:

� Cardiovascular or Blood Toxicant� Gastrointestinal or Liver Toxicant� Neurotoxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant

The Fate of n-Propanol in the Environment

No pertinent data is available. However, as a linear alcohol, n-propanol is likely to degradequickly.


n-Butanol (CAS 71-36-3)

NOHSCPhysico-chemical: Risk: R10 (Flammable)Health: Xn (Harmful);Risk: R20; (Harmful by inhalation)Safety: 2 (Keep out of the reach of children), 16 (Keep away from sources of ignition)Cut-Offs: Concentration ≥ 25%; Xn (Harmful); Risk: R20 (Harmful by inhalation)Environmental: Risk phrases not assigned.


STEL: Peak LimitationCarcinogen category: not categorisedComment: Absorption through the skin may be a significant source of exposure

NICNASThe chemical is on the AICS. No other information held.




Scorecard reports no recognised health hazard. Scorecard reports n-butanol is suspected asbeing a:

� Cardiovascular or Blood Toxicant� Gastrointestinal or Liver Toxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant

The Fate of n-Butanol in the Environment

No pertinent data is available. However, as a linear alcohol, n-butanol is likely to degradequickly.

Isobutanol (CAS 78-83-1)

NOHSC

Physico-chemical: Risk: R10 (Flammable)Health: Xn (Harmful);Risk: R20; (Harmful by inhalation)


Safety: 2 (Keep out of the reach of children), 16 (Keep away from sources of ignition)Cut-Offs: Concentration ≥ 25%; Xn (Harmful); Risk: R20 (Harmful by inhalation)Environmental: Risk phrases not assigned.TWA: 50 ppm or 152 mg/m3

STEL:Carcinogen category: not categorisedNICNAS





Scorecard reports no recognised health hazard nor no suspected hazards.

The Fate of Isobutanol in the Environment

No pertinent data is available. However, as a branched alcohol, isobutanol is likely todegrade slower than ethanol but faster than TBA.

Sec-Butanol (CAS 78-92-2)

NOHSC

Physico-chemical: Risk: R10 (Flammable)Health: Xn (Harmful);Risk: R20; (Harmful by inhalation)Safety: 2 (Keep out of the reach of children), 16 (Keep away from sources of ignition)Cut-Offs: Concentration ≥ 25%; Xn (Harmful); Risk: R20 (Harmful by inhalation)Environmental: Risk phrases not assigned.


STEL:Carcinogen category: not categorised

NICNAS






Scorecard reports no recognised health hazard. Scorecard reports sec-butanol is suspected asbeing a:

� Respiratory Toxicant� Skin or Sense Organ Toxicant

The Fate of sec-Butanol in the Environment

No data is available. However, as a secondary alcohol, sec-butanol is likely to degradeslower than ethanol (a primary alcohol) but faster than TBA (a tertiary alcohol).

MTBE (CAS 1634-04-4)NICNAS

The chemical is on the AICS. MTBE is on the current candidate list for assessment as apriority existing chemical.



Inhalation cancer risk not recognisedInhalation risk value 3,000 (ug/m3)US air quality standard not coveredIngestion cancer risk not recognisedIngestion risk 0.3 mg/kg/dayUS water quality standard 0.02-0.2 mg/L

Scorecard reports no recognised health hazard. Scorecard reports MTBE is suspected asbeing a:

� Carcinogen� Developmental Toxicant� Gastrointestinal or Liver Toxicant� Kidney Toxicant� Neurotoxicant� Skin or Sense Organ Toxicant

Duncan Seddon & Associates PPtyLtd.

Some stakeholders expressed particular concerns about the potential carcinogenicity ofMTBE22

Proposed US MTBE Phase-Out - Blue Ribbon Panel

Background: Oxygen in US Gasoline Pool

The US Clean Air Act Amendments of 1990 (CAAA) established the Federal ReformulatedGasoline Program (RFG). This was implemented in 1995. The CAAA required RFG tocontain 2% oxygen by weight.

Because of unique air pollution problems, California adopted similar but more stringentguidelines for Californian RFG (CaRFG). This required 2.7% oxygen in the gasoline.

In addition areas in both California and elsewhere which did not meet national air qualityrequirements had to introduce a wintertime Oxyfuel program which required gasoline tocontain 2.7% oxygen by weight.

About 30% of gasoline sold in the US is RFG or Oxyfuel. The oxygen in the fuel is providedby:

MTBE 76%Ethanol 19%TAME and ETBE 5%

The dominant oxygenate in the US is MTBE. Ethanol is mainly used in the corn-belt statesof the mid west USA. Ethanol tends to have a high use in winter oxygenated areas where it isused to deliver about 3.5% oxygen to the final gasoline.

Groundwater Contamination

After the introduction of RFG, MTBE started to be detected in US water supplies. About 5 -10% of the water in RFG areas showing contamination. The great majority was below thelevels for public health concerns (< 20 parts per billion). However, even at these levels therewas concern about odour and taste.

The major source of groundwater contamination was from leaking underground gasolinestorage tanks, which contaminated local wells. Other sources have been identified includinggasoline spills to surface water, pipeline leaks and contamination by recreational watercraft.

Blue Ribbon Panel

In response to these issues, the EPA (Administrator C. Browner) appointed the Blue RibbonPanel in November 1998 to investigate air and water quality issues relating to the use ofMTBE. The final report was issued in September 1999 [EXHIBIT 4].

22 See The International Program on Chemical Safety (Environmental Health Criteria No. 26).


The key pertinent recommendations of the Panel were:

• that MTBE should be substantially phased out of gasoline in the USA• in order to facilitate the phase out, the 2% limit on oxygenate level in RFG should be

waived.

There were two dissenting opinions on this issue:

Todd Sneller [Nebraska Ethanol Board, EXHIBIT 5] stated that the CAAA intended thatreducing aromatics in gasoline would attain air quality improvements. The removal of theoxygen waiver for RFG would result in an increased use of aromatics. This would degradeair quality.

Lyondell Chemical Company23 [ EXHIBIT 6] stated that the removal of MTBE wasunwarranted because no public health issue has been identified. The problem withgroundwater contamination had been effectively dealt with by the introduction of new storagetank regulations in 1998. Further, the analysis used by the Panel to support the view that airquality would be maintained was flawed and air degradation would result.

The Blue Ribbon Panel held several meetings and took many formal submissions24. Thefollowing summarises salient findings of the Panel:

Water Contamination

The result of using MTBE in RFG was an increase in detection of the additive in drinkingwater. Between 5 and 10% of drinking water in high oxygenate areas was contaminated. Thegreat majority was well below the level of concern, many near the detection limit. About 0.3to 1.5% of analyses showed value of MTBE above 20 ppb. One study [GRADY] showed thatMTBE contamination was found principally in RFG areas25.

Several studies noted that MTBE was associated with detection of volatile organic (VOC)compounds but not benzene, toluene, ethylbenzene and xylenes (BTEX) [GRADY,SQUILLACE].

Sources of contamination were identified as releases from underground gasoline storagetanks, pipelines, spills, improper disposal, and surface water contamination from storm waterrun-off and watercraft.

Fate of MTBE in the Environment

Relative to other components of gasoline, MTBE is more soluble in groundwater, is adsorbedless readily on soil particles and biodegrades less rapidly. In groundwater it moves morequickly than other components [HAPPEL, SALANITRO].

23Lyondell are a major supplier of MTBE.24These are available on the US EPA web site, follow the links to the Blue Ribbon Panel.25Interestingly there was some detected in non RFG areas but this could be from the widespread use of MTBE ata lower level than that required for RFG.


Air Quality Benefits

The efficacy of the RFG Program has been extensively studied. The most comprehensivedata used by the Blue Ribbon Panel was a report conducted by the Office of Science andTechnology [OSTP June 1997].

In Phase 1 of the program the achievements of the program have been better than anticipatedby the regulations. Indeed in some instances, better quality has been achieved than thatanticipated in Phase 2 of the program which started January 2000.This observation is important because it permits the deduction that MTBE could beremoved and the compliance with CAAA still achieved.

However, it was recognised that removal of oxygenates may cause some problems and otherissues (eg CaRFG where there is also a low cap on the aromatics level).

Carbon Monoxide

The Panel recognised that if oxygenates are removed from fuel there would be expected to bean increase in the level of CO emissions. However, the turnover of the vehicle fleet withstricter compliance of tail pipe emissions (due to lean burning and catalyst changes) wouldlargely mitigate this effect.

From the Australian perspective, we have to acknowledge the relative large age of theAustralian vehicle fleet with significant number of vehicles without any form of emissioncontrol. We may deduce that increasing olefines and aromatics in the fuel will result in airquality deterioration especially in the large urban centres.

TAME and Other EthersNICNAS

DIPE is on the AICS. No other information held.

TAME, ETBE and ETAE are NOT on the AICS. No information held

There is no data in Scorecard on TAME or ETBE. DIPE is reported as a suspectedneurotoxicant.

Other ethers are likely to be similar, although not identical to MTBE, ie is highly soluble inwater, is poorly adsorbed by soil and have low biodegradation rates.


Comparison to BTEX and AlkylateNICNAS

Benzene is on the AICS and is under assessment as a priority existing chemical.

Toluene and xylenes are on the AICS and are on the candidate as a priority existingchemicals.

Butane and isooctane are on the AICS, no other information is held

Behaviour in Water

Aromatics (BETX) from the standpoint of hydrocarbons are relatively soluble in water. Thesaturation level is in the order of 1000 - 3000 ppm. Aromatics are readily biodegradable.

Alkylate (as exemplified by isooctane) is very much less soluble in water than aromatics. Thesaturation level is typically 50 ppm.

Comparative Data

Data showing the relative potential of the various additives to contaminate potable water andground water is presented in Table 12:


TABLE 12aCOMPARATIVE DATA

Contamination Potential of Potable Water26

BENZENE

MTBE ETHANOL ETBE TAME TBA ISOOCT.

Solubility in Water(g/100g H2O) 0.0178 4.8 MISCIBLE 1.2 1.2 MISC. <<0.01

Sol. from gasoline(g/100g H2O) <0.01 0.55 5.7 0.33 0.24 2.5 -

Taste in Water(ug/L) 500 20-40 - 47 128 - -

Odour (ppm) 0.5 0.053 49 0.013 0.027 21 -

TABLE 12bContamination Potential of Groundwater

Solubility(mg/L)

Vap. Pres.mmHg

Henry’s law Log Koc

Importance in rate of migrationbioavailability

evaporationfrom spills

soil vapourextraction

evaporationfrom water

rate of migrationsoil absorption

Methanol infinite 130 0.0001 0.7Ethanol infinite 50 0.000252 0.7TBA infinite 40 0.0005 1.6MTBE 50000 245 0.02 1.15ETBE 19000 180 0.1 1.6TAME 16000 80 0.055 1.7DIPE 4500 170 0.4 1.6Benzene 2000 95 0.22 1.8Toluene 540 28 0.2 1.8Xylenes 180 8 0.3 2.5

The data in the first table (Table 12a) indicates that although MTBE is not the most soluble,nor has the strongest odour, it can be detected in water by taste at extremely low levels.

The second table of data (Table 12b) complements the first. The first column indicates thatalcohols are miscible with water and the ethers are quite soluble in water. Gasolinecomponents are relatively insoluble.

The second column (vapour pressure) shows that the ethers and methanol are the most likelycomponents to evaporate from spills.

The third column gives Henry�s Law constants. Components with values <0.05 are unlikelyto evaporate from surface water (alcohols, MTBE, TAME).

26Blue Ribbon Panel report EXHIBIT 4


The values for the octanol/water partition coefficient are shown in column four. Theoctanol/water partition coefficient (Koc) gives and indication of how strongly (or weakly) awater contaminant is held by soil particles. A relatively low Koc indicates a lower attractionto the soil. As the Koc value falls towards unity, the contaminant moves at the speed ofground water.

Ferrocene (CAS 102-54-5)

Ferrocene is on the AICS list.

Scorecard reports no recognised health hazard. Scorecard reports ferrocene is suspected asbeing a:

� Endocrine Toxicant� Gastrointestinal or Liver Toxicant

The Fate of Ferrocene in the Environment

Octel has provided exhaust emission toxicological data on vehicles using gasoline containingferrocene. In none of the studies conducted, could differences in the toxic effects of theexhausts, deriving from fuel without and with 30 ppm ferrocene (Octel recommendedmaximum dosage), be detected. Particularly in the inhalation studies, using the highestexhaust concentrations technically possible, no toxic effects from the exhaust from enginesequipped with 3-way catalysts, could be detected.

In another test, no significant differences were found in the regulated emissions of carbonmonoxide, hydrocarbons, nitrogen oxides, particulate matter, poly-aromatic hydrocarbons,mutagenic activity and TCDD-receptor activity [EXHIBIT 29].

Iron is widespread in nature and a basic constituent of motor vehicles. Ferrocene emissionsfrom the tailpipe would be as iron oxide. Iron oxide emission would be expected fromnormal engine wear and ferrocene use at the recommended levels may not add significantly tothe total levels of iron emission.

MMT (CAS 12108-13-3)

Manganese is an essential element for human health and is widespread in nature. Problemsoccur in as a consequence of high exposure.

NOHSC

No hazard classification

TWA: 0.2 mg/m3

STEL:Carcinogen category: not categorisedComment: Absorption through the skin may be a significant source of exposure


NICNAS

NICNAS has formally called for information from industry sources on the use of thischemical in Australia to determine whether it should be assessed as a priority existingchemical.

Scorecard reports no recognised health hazard. Scorecard reports MMT is suspected asbeing a:

� Neurotoxicant� Respiratory Toxicant

The Fate of MMT in the Environment

MMT has been used in Canadian gasoline since 1976 and MMT and manganese in theCanadian environment has been subject to extensive review [EXHIBIT 20].

MMT was found to be oxidised very quickly in ambient air to manganese oxides and of itselfMMT did not pose a risk In this early study, the Canadian workers estimated that up to 40%of the manganese present in the gasoline was emitted from the tailpipe as manganese oxides.However, more recent data indicates that actual emission of manganese from the tailpipe ismuch lower (12 - 16%) with the manganese being present as the more inert manganesephosphates or silicates [EXHIBIT 25].

For cities in Canada with no major manganese emitting industries, the sampling of urban air,water and dust was taken to represent the impact of MMT in gasoline.

The work found that urban air was below the benchmark levels at which no adverse effectswere to be expected. The analysis also included infants and the elderly who are more proneto risk by manganese poisoning.

There was no correlation between the manganese content of particulate matter and the sales ofMMT gasoline. However, there was some association of manganese levels with city size andtraffic density.

For these cities MMT was found not to be entering the environment at a rate which wouldcause concern.

For cities with manganese emitting industries (eg steel mills) average exposure was above thelevel at which health problems may have occurred. This was deemed to be unrelated to MMTin gasoline.

In Australia there is a major manganese mining operation at Groote Eylandt in the NorthernTerritory, and major manganese dioxide production plant and steel mills in several cities inAustralia.


Gasoline Components

The main interest is in the effects of benzene and other aromatics. Most of the additives arecompared with benzene and comparative data is included in the above information for MTBEand ethanol. For comparison, the toxicity as reported by Scorecard are:

Benzene ((CAS 71-43-2)



Inhalation cancer risk 0.000029 (ug/m3)Inhalation risk value 60 (ug/m3)US air quality standard not coveredIngestion cancer risk 0.1 mg/kg/dayIngestion risk data gapUS water quality standard 0.005 mg/L

Scorecard reports benzene is a recognised health hazard:

� Carcinogen� Development Toxicant� Reproductive Toxicant

Scorecard reports benzene is suspected as being a:

� Cardiovascular or Blood Toxicant� Endocrine Toxicant� Gastrointestinal or Liver Toxicant� Immunotoxicant� Neurotoxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant

Toluene (CAS 108-88-3)

NICNAS

Listed on the NICNAS candidate list for possible assessment as a priority existing chemical.



Inhalation cancer risk not recognisedInhalation risk value 400 (ug/m3)US air quality standard not covered


Ingestion cancer risk not recognisedIngestion risk 0.2 mg/kg/dayUS water quality standard 1 mg/L

Scorecard reports toluene is a recognised health hazard:

� Development Toxicant

Scorecard reports toluene is suspected as being a:

� Cardiovascular or Blood Toxicant� Gastrointestinal or Liver Toxicant� Immunotoxicant� Kidney Toxicant� Neurotoxicant� Reproductive Toxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant

Xylene (Mixed Isomers) (CAS 1330-20-7)

NICNAS

Listed on the NICNAS candidate list for possible assessment as a priority existing chemical.



Inhalation cancer risk not recognisedInhalation risk value 700 (ug/m3)US air quality standard not coveredIngestion cancer risk not coveredIngestion risk 2 mg/kg/dayUS water quality standard 10 mg/L

Scorecard reports xylenes are not a recognised health hazard: Scorecard reports xylene issuspected as being a:

� Cardiovascular or Blood Toxicant� Development Toxicant� Gastrointestinal or Liver Toxicant� Immunotoxicant� Neurotoxicant� Reproductive Toxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant


Other Components

Scorecard reports butane (CAS 106-97-8) as a suspected neurotoxicant

Isooctane (CAS 540-84-1) is reported as a suspected:

� Gastrointestinal or Liver Toxicant� Kidney Toxicant� Respiratory Toxicant� Skin or Sense Organ Toxicant


IMPEDIMENTS OF HARMONIZATION WITH EUROPEAN UNIONQUALITY STANDARDS

Overview

The Fuel Quality Review [COFFEY] sets out the approach to improve emissions fromAustralian vehicles. This involves the regulations concerning the construction of vehicleengines. However, if such vehicles are to achieve the envisaged improved performance, therehas to be concomitant improvement in the quality of the fuel. Since the improved enginedesigns emanate from Europe it would be natural for Australia to harmonise with Europeanfuel quality standards, specifically Euro-3 and Euro-4 fuels.

This report addresses this issue from the standpoint of spark ignition engines (gasoline) andreports on the substantive issue of lifting the octane value of the gasoline pool from thecurrent value of about 92 to 95 RON.

The World-Wide Fuel Charter (WWFC) promotes the harmonisation of fuels from thestandpoint of the vehicle manufacturers of USA, Japan and Europe. The WWFC has recentlybeen revised [EXHIBIT 23]. Whilst there is a lot of common ground between the Euro-3 andEuro-4 specifications, there are some subtle differences which may impact on the use ofoctane boosters.

As well as 95 RON, the WWFC gives specifications for a 98-octane fuel. Fuel of 98 RONhas not been the primary consideration of this Study.

The WWFC represents the considered opinion of the auto-manufacturers and is used by thelocal industry in Australia to define the optimum fuels from their standpoint.

TABLE 13THE PRESENT POOL AND THE TARGET27

ULP (1998) Euro-3 Euro-4 WWFC-3RON 91.6 95 95 95MON 82.5 85 85 85Sulphur (ppm. max.) 150 150 50 30Benzene (% max.) 2.6 1 1 1Aromatics (%) 27.5 42 35 35Olefins (%) 17.1 18 14 10RVP (kPa, min.) 71 60 55 45 - 60Oxygen (% max.) ~0 2.7 2.7 2.7

The data in Table 13 (above) illustrates that the 1997 pool average more or less met Euro-3standards with respect to sulphur, aromatics, olefins, but fell short of the standards withrespect to octane (RON and MON), benzene and RVP.

27From page 51 of draft �Setting National Fuel Quality Standards - Paper 2� and Fuel Quality Report, Table 5-1


Note that although no minimum oxygen level is stipulated, the maximum oxygen content is2.7%.

The WWFC specifies that ethers are preferred oxygenates. Where ethanol is used >C2alcohols are limited to 0.1% and methanol is not permitted. The Charter specifically excludesmanganese additives.

Australia has eight major refineries producing about 18,300 million litres per year [AIP]. Thebulk of the petrol is made to approximately the above composition (Table 13) for theunleaded grade and (after addition of lead) leaded petrol grades. Unlike the large European,Singapore and US operations, the Australian refineries are largely stand-alone operations andthere is very limited ability to transfer intermediates between refineries. This means therefineries are producing specification product within the boundaries of the refinery and placesthem at a cost disadvantage relative to the larger integrated operations.

The preferred option of the refiners is to continue this practice and to produce thespecification fuels without resorting to import of additives or boosters. There are three waysto boost octane28:

1. Isomerisation Isomerisation will improve the octane value of the lighter hydrocarbons (C5 and C6),commonly referred to as �light straight run gasoline� (LSR). LSR can have low octane eg 70RON. However, isomerisation is limited to achieving a product of about 90 RON.Nevertheless, this may be sufficient to get the finished gasoline to the target value.Isomerisation product contains no olefines, benzene, aromatics and little if any sulphur and socontributes well to all of the other criteria. Isomerisation is costly and to achieve the higher octane (multiple pass operation) results infeedstock losses - this ultimately results in increased greenhouse emissions. Isomerisation is practiced at the Caltex refineries at Lytton and Kurnell, BP Kwinana, MobilPort Stanvac, Shell Geelong 2. Alkylation Alkylation involves the reaction of light olefines (propylene and butylenes with isobutane toproduce highly branched paraffins. If isobutene is used, the product is isooctane with RONand MON values of 100. If mixed olefines are used, the octane is typically about 95. Alkylate is highly sought after by refiners because of its high octane (both RON and MON)and no sulphur, aromatics or olefines. Most of the alkylate is used within refineries, but there

28The construction of a finished gasoline is quite complex and this is a simplified view, which tries to get to theessence of the problem. I have omitted fluid cat-cracking (FCC) which produces a very large volume of gasolineblend stock rich in olefins with a final octane of about 92 RON. As well as olefins, FCC also produces somearomatics. It is assumed that FCC operation is limited by the maximum olefin content of the finished gasolineand this limits the refinery�s ability to increase FCC output. However, inspection of the table shows there is someflexibility to do this for Euro-3 but not for Euro-4 fuels.


is a small trade. As discussed above (under financial cost of additives), alkylate may becomea target product for US refiners wishing to eliminate MTBE. All the refineries, which can produce and separate light olefines and isobutane, have analkylate producing facility. Only the Mobil refinery at Port Stanvac has no alkylation facility. There are two types of alkylation process, one based on sulphuric acid and the other onhydrofluoric acid. Both have their proponents and opponents and both have environmentalwaste problems. 3. Reforming Reforming produces aromatics from saturated hydrocarbons with six or more carbon atoms.The feed stock is heavy naphtha with an octane of about 40 - 50 RON and the product iscalled reformate with a RON of 98 or more. Reforming is thus the powerhouse of octaneboosting within the refinery. All major fuels refineries have a reformer. Reforming produces BTX as the principal products. High severity reforming which givesreformate >100 RON is usually only practiced by operations integrated into petrochemicalswhere benzene is a desired product. Most refinery reformers operate at much lower severity.Selecting the feed stock to avoid benzene (C6) precursors can reduce benzene content. The reforming of hydrocarbons to produce aromatics is energy intensive and the increased useof reforming or more severe reforming to increase aromatics inevitably leads to highergreenhouse gas emissions. Since the ability to use isomerisation and alkylation is limited, Australian refiners would relyon increasing the use of reforming to lift octane to the target levels. As a rule of thumb, a one number octane lift is achieved by a 2% rise in the level ofaromatics. Using this rule, we see that the present pool octane could be lifted to 95 RON byan increase in 6% in the aromatics. Very roughly this would mean that the gasoline poolwould be about 34% aromatics. This is lower than the Euro-3 standard. We thus concludethat:

Euro-3 95 Octane fuel can be achieved by increasing the level of aromatics. However, we also note that this would produce a pool gasoline that would approach the Euro-4 and WWFC - 3 limit for aromatics29. For these standards additional process plant -increased isomerisation or alkylation capacity would probably be required or the refinerswould have to use of an octane booster.

An octane booster may be required to achieve Euro-4 standards. Differences in process plant available, and hence base stock gasoline of varying quality, at thedifferent refineries in Australia raises the prospect that there is unlikely to be a universallyacceptable octane booster. In other words what might be necessary in one particular refinerymay not be required at others.

29 Note the aromatics level of PULP in 1998 was reported as 35.7%, ie higher than Euro-4


Different octane boosters may be required at the different refineries The problem of minimising aromatics is exacerbated when one considers the possibility of98-octane fuel being widely introduced.

Environmental Impact of Increased Aromatics in Gasoline Pool There is a substantial body of data (and opinion still being debated in the USA) that increasedaromatics in the gasoline pool leads to a degradation of air quality. This problem would be ofparticular relevance to the larger urban centres in Australia.

Increased aromatics would not result in increased emissions from the new vehicle fleet builtto the design regulations for which the new fuel standards are designed. Such vehicles are tobe equipped with the latest lean-burn and catalytic conversion technology that willsubstantially eliminate all of the pollutants. Rather, increased air pollution will arise from: • fugitive emissions in the delivery chain form the refinery to the petrol tank• emissions from vehicles not designed to the new standards Of these the latter is probably more important because one of the distinguishing features ofthe Australian automotive fleet when compared to the European and USA fleets is the numberof older (> 10 years) vehicles.

Increased aromatics in the gasoline pool may result in increased air pollution from theolder vehicle fleet.

As a consequence this may force the use of octane boosters to achieve the Euro-3 standardbefore the introduction of Euro-4. Because of higher traffic densities, pressure to controlaromatics may particularly apply to Melbourne and Sydney first, with the prospect thatrefineries supplying these markets will be the first to use additive octane boosters.

Issues Octane and Greenhouse Today there is a considerable amount of interest in the reduction of greenhouse gases withmost emphasis being placed on the principal greenhouse gas, carbon dioxide. For ourconsideration, greenhouse gases in the transport sector arise from two sources:

1. At the refinery by converting crude oil into transport fuels, and2. In the vehicle

Vehicle emissions are directly linked to the engine efficiency (km/litre). The engineefficiency is related to the compression ratio - the higher the compression ratio the better theefficiency. Higher compression ratio vehicles require higher-octane fuel. This is the positionunder which the automotive manufacturers are working to achieve their commitments togovernment to improve efficiency.


From the standpoint of the refiners we have the opposite. On the basis of thermodynamics,transport fuel is higher in energy30 than crude oil, and the more refined the transport fuel(essentially higher the octane), the bigger the energy difference. This means that to convertcrude oil into higher octane gasoline requires more energy. Unfortunately, there is also amismatch in the carbon-hydrogen content of crude oil when compared to gasoline. Crude oilcontains more carbon than gasoline and the more refined the gasoline the less carbon itcontains31. Refinery operations achieve this balance by rejecting carbon as carbon dioxide. This issue is particularly pertinent when producing higher-octane gasoline (98 RON). Such afuel would produce improved vehicle engine efficiencies but at the considerable cost ofcarbon dioxide emissions in the refineries.

There is obviously an optimum, but to our knowledge there has been no attempt to determinethat optimum.

We do not know if increasing octane will result in a net (global) improvement orincrease in greenhouse gas emissions.

Greenhouse (2)

In addition to the above we note the potential use of oxygenates and MMT to lower theAustralian quantum of greenhouse emissions. This is because the oxygenates would beproduced in non Kyoto signatories or from biomass. MMT reduces vehicle emissions as wellas allowing refiners to operate at lower intensity and hence save energy.

Variance within Standards The Euro-3 and WWFC - 3 fuels attempt to define world fuels, so that for example, the samecar will perform in the same manner wherever the fuel is available. However, inspection ofthese fuels standards reveals that there is permitted quite a large variation in composition.For instance, on the one hand, a fuel could comprise entirely hydrocarbons and on the othercould contain MTBE or ethanol (set by the maximum oxygen level of 2.7%) or MMT. Even within the hydrocarbons there is some permitted variation. This is because the densityis permitted to range over a relatively large value. For example WWFC - Category 3, thepermitted range of density is 715 - 770 kg/m3. This should be compared to the density valuesof isooctane (692 kg/m3) and toluene (867 kg/m3). This illustrates that fuels can be preparedby mixing aliphatic hydrocarbons and aromatics in varying proportions. As an aside we should note that a gasoline comprising substantially the use of alkylate(isooctane), which many regard as the best gasoline blendstock, would not be permitted underWWFC-3 (and possibly Euro-3), because the density would be too low.

30Free energy31H/C ratio for crude oil typically <1.5; for isooctane H/C ratio >2.


The consequence of this is in terms of the energy efficiency as measured in terms of km/L offuel32. Lower density fuels translates into a lower energy density and hence lower km/L. One way to assist this problem would be to move to standards of fuel efficiency based onkm/kg of fuel. Another consequence is that for large geographically spread areas served by a multitude ofgasoline sources (refineries and import in the case of Australia) there is unlikely to be one�national� fuel without considerable further tightening of the standards. This argument equally applies to Europe. The author believes it highly unlikely that thegasoline sold to Euro-3 and Euro-4 standards will have the same composition across Europein terms of some of the key components such as MTBE content and the ratio betweenaliphatic and aromatic hydrocarbons.

MTBE Bans and Phase Out - Shooting the Messenger The present concern with MTBE stems from the contamination of ground water. Theprincipal culprit is leaking underground gasoline storage tanks near to wells and groundpotable water supplies. MTBE can be tasted in water at the parts per billion level and testmethods have been developed to detect MTBE at this extremely low level. At these levelsthere has been no suggestion of human health problems. Whilst we can sympathise with water authorities relying on the supply of water fromunderground aquifers, banning MTBE may be too severe a reaction. Since MTBE does not occur naturally, the detection of MTBE in ground water near togasoline storage tanks clearly indicates that there is a serious problem of leaking fuel. Banning MTBE from the gasoline does not stop the root cause of the problem - leakingtanks. Banning MTBE implies that the regulation, inspection and maintenance of undergroundstorage tanks are deficient. Further, it should be realised that other materials are likely to be detected from leaking tanks(eg ethanol, which brings with the likelihood of increased benzene and aromatics33). Arethese other additives to be banned?

The controversy surrounding MTBE has sparked further research into its possiblecarcinogenicity. Again there is much on-going debate. However, we should remember thatwe are discussing an additive to petrol which itself comprises many highly toxic materials.

32The vehicle manufacturers determine mileage by a process proscribed in ADR 79/00 Emission Control forLight Vehicles. This process calls for a specific fuel, which is much more tightly defined from the standpoint ofdensity (0.741 to 0.755 kg/L).33Indeed, as ethanol use becomes a more widespread alternative to MTBE, there is now concern in Californiathat water supplies are being contaminated by ethanol from gasoline Oxy-Fuel News, May 15, 2000. Such asituation may arise in Australia if ethanol is added here without proper management of gasoline storage facilities.


Ethanol in Gasoline The use of ethanol in gasoline has a long history in Australia and is practiced by severalgroups. The normal practice is to use 10% ethanol as an extender to the gasoline with theparticular aim of producing premium unleaded fuel (ie 95 RON). At 10% ethanol this fuel will not meet the European standards with respect to RVP andoxygen content. We have presented data to show that blending ethanol into gasoline at levels commensuratewith the Euro-3 oxygen limit (< 7.8%) will result in difficulties in meeting the proposedlower RVP requirements (60 kPa falling to 55 kPa for Euro-4). Prima facie the use of ethanol is not compatible with the proposed Euro-3 and Euro-4standards. Nevertheless, we have to recognise that there is a considerable amount of social pressure touse ethanol in the gasoline pool. For this role the standards with respect to RVP may have tobe eased. Unfortunately, this will produce internal contradictions within the standards,specifically with regard to the final RVP and the reason for capping RVP. This arisesbecause RVP is capped to improve air quality in the summer months, but ethanol is known toexacerbate this problem and presumably would not be subject to the new RVP cap.

Ethanol - Familiarity Breeds Contempt Australia has a long history of the use of ethanol in transport fuel. This has generally been incontrolled demonstration programs and in relatively small areas. For this use no excise isapplied to the ethanol component (equivalent to about 45-c/L subsidy). Unfortunately, Australia has a long history of ethanol abuse. As beverage alcohol, ethanolattracts an excise of about $35/L. There have been proposals to increase the excise to lowerethanol consumption. Whilst there is no evidence of fuel ethanol being illegally used as hooch, we must be aware ofthe possibility, especially if the use of ethanol becomes more widespread. As we have discussed above, ethanol is relatively easily extracted form gasoline by contactingthe gasoline with water. Unfortunately, there are also many recipes for removinghydrocarbon contaminants from aqueous ethanol34. The attraction for removing ethanol fromgasoline for illegal use is exacerbated by the enormous tax differential35. If the use of fuel ethanol in gasoline increases then the potential for an illegal industry shouldbe addressed. One option might be in incorporate addition higher alcohols in the blend thatwould serve to contaminate any ethanol that was illegally extracted. We note that this maynot be acceptable to the WWFC-3 standard which limits higher alcohols to 0.1%. 34In the USSR industrial ethanol was contaminated with benzene, with which it forms an azeotrope so cannot beseparated by distillation. There were several recipes for removing the benzene to make hooch.3560L of gasoline (a tank full) at 10% by volume would contain $210 worth of ethanol valued as beveragealcohol.


MMT - To Be or Not To Be Although MMT is not permitted under WWFC-3 rules, we note that the Charter proponentsare intending to produce a position paper in the next few months. However, MMT is gaining widespread acceptance from the refining side of the industry,especially for formulating lead replacement petrol. We have noted that because of the relatively high aromatics levels present in Australiangasoline basestock, MMT may only contribute a minor value to the octane. Nevertheless,MMT may be important in allowing refiners to �trim� the final gasoline to ensure a minimum95 RON. For this end MMT may be used in lower than the normal dosage of 18 mgMn/L. Further, we note that MMT can be used beneficially with oxygenate octane boosters (ie. bothcontribute to octane). This may allow optimisation from several standpoints by using a mixof additives such as MTBE, ethanol and MMT.


STAKEHOLDER INPUTS

The following are summaries of views expressed to us during the course of the Study.

Motoring Organisations

Correspondence for various motoring organisations is presented in EXHIBIT 15.

Australian Historic Motoring Federation Inc. and Australian Automobile Association

The AHMFI and AAA expressed the view that forecourt additives that increase octane mustbe mandated to the relevant Australian Standard and that only such products should beallowed to be marketed and distributed in Australia.

From the standpoint of this Study, I assume that in essence this means that by addition of theadditive to the fuel by the motorist would not result in the fuel (in the tank) departing fromthe fuel standard.

NRMA

MTBE is not supported because of its impact on groundwater.MMT - not supported because its use is still controversial on a range of issues.No objection to ethanol/methanol up to 10% but must not be subsidised.Other compounds must be shown to be beneficial without excessive environmentaldegradation and able to be produced at a competitive cost.

Australian Institute of Petroleum

The following are meeting notes. Draft notes and further commentary from participants aregiven in EXHIBIT 15.

MEETING REPORTMAY 10TH. 2000@ BP AUSTRALIA; 360 ELIZABETH STREET, MELBOURNEPRESENT:

Ewan Macpherson, Australian Institute of PetroleumNatalie Smirk, BPFrank Russell, BPGeoff Davis, Mobil AustraliaAdrian Moore, Caltex Australia LimitedGreg Engeler, Caltex Australia LimitedLeon Haliburton, Shell AustraliaJohn Harris, Shell AustraliaJohn Harris, RMITDuncan Seddon


TOPIC: Octane Boosters

The objective was to ascertain the current industry views with regard to octane boosters. Theconsensus was as follows:

• Australian refiners would want to have the greatest flexibility possible in their endeavoursto improve fuel quality standards and to boost octane.

• All the majors have had considerable experience in the use of MTBE in USA (where it isadded for air quality reasons), Europe and the Far East (where it is added for octaneenhancement), but all were of the view that they did not want to expand this usage andhence did not favour the use of this additive in Australia. There was a similar position onTAME and ETBE.

• Concern was expressed that the Euro-3 standards were developed within a framework ofthe widespread use of MTBE (about 10%) and that removal of MTBE may causeproblems in achieving this standard in Europe.

• None would want to see the introduction of a 98 or 100 octane grade which would beavailable at all outlets, although no problems with such high octane grades being availableat specialist outlets.

• Increased octane would generally be achieved by increasing the severity of reforming, ie.increase in the level of aromatics. The addition of oxygenates was an option, but not thepreferred route. As a rule of thumb an increase in 1 octane was equivalent to an increasedin aromatics of 2%. An ideal refinery could achieve 95 octane by a combination ofisomerisation, alkylation and reforming. However, there was insufficient isomerisationand alkylation capacity in Australian refineries. This left the local industry to rely onreforming by increasing the aromatics level. Achieving low benzene levels would requiresome changes to reformer operation or benzene extraction.

• The cost of octane was in the order of US$ 50 cents/octane barrel.• All agreed that methanol would not be used because of safety, blending and corrosion

issues.• Ethanol was the most acceptable oxygenate. However, there were major problems: MON

is an issue because ethanol does not lift MON very much; the use of ethanol would giverise to problems in meeting summer vapour pressure specifications; cost is a problem asethanol is only economic because of its excise free status, and in low cost crudeenvironments ethanol could be uncompetitive.

• Although TBA and IPA was in use in Japan, there was no enthusiasm for using theseadditives. The lack of infrastructure was a particular problem.

• In reaching the new specifications with regard to vapour pressure, this caused therefineries to back out butane. The choices for the refinery for using the displaced butanewere LPG, which is opposed by some groups, internal use as fuel gas or flaring.

• The ferrocene additive being marketed by Associated Octel would not be used.• There was interest in the use of MMT and all the majors had experienced its use in

Canada and elsewhere. However, most of the local refiners would not use this additive inunleaded petrol unless the vehicle manufacturers sanctioned its use. However, for mostrefiners this did not apply to the addition of MMT in Lead Replacement Petrol (Caltex,Shell, Mobil). It was noted that lubricating oil and other fuel additive packages allcontained metals.

• If an additive had to be added, there may be issues with the import and tankage of theadditives.


• Blending up gasoline from variously imported base stocks might result in drive-abilityindex problems which was not the case for refinery produced product.

Federal Chamber of Automotive Industries

The following meeting report notes the attitude of the local vehicle manufacturers towardsoctane enhancers.

MEETING REPORTMAY 17TH. 2000@ TOYOTA ENGINEERING CENTRE, 61 BERTIE STREET, PORT MELBOURNEPRESENT:

Rex Scholar, FCAIKeith Marsh, MitsubishiM. Preston, BMWM. Frankie, HoldenS. McDonald, FordP. Stirling, HoldenP. Chear, NissanJ. Lindsay, RoverM. Morarty, Toyota

John Harris, RMITDuncan Seddon

TOPIC: Octane Boosters

The objective was to ascertain the current industry views with regard to octane boosters.

The consensus was as follows:

• Australian motor vehicle manufacturers are generally technology takers from thestandpoint of engine development. This means that engine performance standards aregenerally determined by the overseas affiliates.

• This means that for fuel standards, the local industry takes the lead and opinions fromthose expressed by internationally agreed procedures. Specifically, the approach to fuelstandards is taken from the World-Wide Fuel Charter (WWFC) developed by TheEuropean Automobile Manufacturers Association, Alliance of AutomobileManufacturers, Engine Manufacturers Association, and Japan Automobile ManufacturersAssociation.

• The latest version (April 2000) states the latest industry view on aromatics, volatility,MMT and oxygenates.

• Auto Industry is strongly opposed to MMT and is pessimistic re. use of metal additivesfrom the point of view of possible engine/emission control components contaminationand likely environmental objections.

• Oxygenates could be tolerated, but offer no direct benefit to the vehicle operator - they arefuel diluents, rather than extenders and result in poorer fuel consumption. Local


experience indicates that E10 (10% ethanol) could be tolerated. Ethanol in highconcentrations (>20%) had a detrimental effect on paint and finishes of some vehicles.

• In discussion, it was realised that the WWFC fuels standards permitted a significantvariation in fuel composition. This meant fuels may or may not contain oxygenates, allowdensity to vary over a wide range (hence vary in the relative amounts of aliphatics (lowdensity) to aromatics (high-density) components). It was not immediately apparent whatthis permitted variation would have on the agreed vehicle performance standards.

• DS expressed the opinion that the variance in WWFC standards would permit variationsin gasoline composition in Europe and Australia, ie there will not be a common fuel of thesame composition in apparently homogeneous, but large geographically spread, markets.This impact of this on the industry was not clear.

Duncan Seddon & Associates Pty. Ltd.

RECOMMENDATIONS

The principal objective of fuel harmonisation is to harmonise Australian fuel standards withEuropean Standards Euro-3 and Euro-4. This requires a minimum octane value of 95 RON.

Although this can be achieved using conventional fuels the European standards allow for theuse of oxygenate octane boosters to a level of 2.7% by weight oxygen. In Europe thepreferred oxygenate is MTBE.

MTBE is extensively used in the USA in the reformulated gasoline program. RFG is used in30% of all gasoline sold in the USA. US RFG has a lower octane level than the EuropeanStandards. The continued use of MTBE in gasoline is currently under considerable debateand the US Executive is proposing MTBE phase out. The costs and practicality of MTBEphase out is being studied extensively and is the subject of ongoing debate.

It is not clear if the US can maintain the benefits of the Clean Air Act withoutoxygenates.

The cost of changing to new standards in Europe has been analysed [CONCAWE 99/56].This analysis explicitly assumes the use of 2.7 million tonnes of MTBE in the Europeangasoline pool in 2010, mainly in Germany, France, Italy and Greece.

It is not clear if the Euro-3 and Euro-4 standards could be achieved in Europe withoutMTBE.

Because of these uncertainties the principal thrust of our recommendations is to permitmaximum flexibility for the industry to produce fuels to the Euro-3 and Euro-4standards.

Of the oxygenates available, MTBE and ethanol are used extensively overseas. In someplaces (mainly USA and Europe) the higher ethers TAME and ETBE make a contribution.Other higher alcohols may make a contribution on an occasional basis.

We recommend36 the following:

1. MTBE is the preferred octane enhancer of the world oil industry and would besuitable for use in Australia. In order to ameliorate concerns with groundwatercontamination, a national audit on the status of gasoline transport (pipelines) and storageshould be conducted with the object of identifying issues that would lead to pollution ofwater supplies by any gasoline component.

2. Prima facie the use of ethanol is incompatible with proposed standards with respect to

oxygen content and RVP at the commonly used 10% level. Waivers specifically for

36Our recommendations are based on an optimal response to the problem of fuel harmonisation involving coststo the motorist, cost to the refiner and environmental impacts. It should be recognised that the health effects ofthe chemicals are reviewed from secondary sources and it may be that recently published material has beenoverlooked which may be prejudicial to one or more of the additives.


ethanol in these areas are not in line with the aim of the standards. Nevertheless, werecognise the social desire to see ethanol included in the Australian gasoline pool. Theuse of ethanol in future Australian gasoline pool should be subject to further analysis,particularly defining how the required RVP from ethanol blends can be met usingAustralian basestocks.

3. In order to maximise the flexibility for refiners or importers to provide high octanegasoline, it is possible that ETBE and TAME could be used, once these chemicals havebeen notified by potential manufacturers and importers to NICNAS and assessmentcertificates have been issued. ETBE and TAME are not currently listed on AICS

4. The widespread introduction of 98 octane fuel would require a substantial review of

octane production in Australia, implying a major overhaul of refinery operations. It is notclear if 98 octane will result in a net global emissions improvement. Until this is clarifiedby additional work, the widespread introduction of 98 octane gasoline should not beencouraged by auto-makers and regulatory agencies.

5. There should be no in-principle objections to the use of either MMT or ferrocene.

MMT is the best researched and most widely used and would offer the refiners a methodof ensuring the final gasoline is of the required octane (trimming). There is increasinginterest in ferrocene, however, the depth of analysis is much less that that for MMT.Further there are several alternative suppliers of ferrocene and quality standards of theadditive may be a concern.

6. To facilitate flexibility, the following oxygenates should be permitted in Australianpetrol. These oxygenates could be used alone or in combination with other oxygenates orpermitted organometallic compounds (MMT, ferrocene). The maximum level should beset by the Euro-3 maximum oxygen content of 2.7%:

Oxygenate Chem. Abstract No.

Ethanol 64-17-5 TBA 75-65-0 MTBE 1634-04-4 DIPE 108-20-3 ETBE 637-92-3 TAME 994-05-8 ETAE 919-94-8 Isopropanol 67-63-0 n-propanol 71-23-8 Isobutanol 78-83-1n-Butanol 71-36-3sec-Butanol 78-92-2

Duncan Seddon & Associates Pty. Ltd

REFERENCES

AIP, Australian Institute of Petroleum Statistical Review 1999, Petroleum Gazette 3/1999,p.39

Braun A., �Octane Boosters and Australian Petrols� SAE Australasia, Jan/Feb 1985 and A.R.Braun, �Automotive Fuel Extenders from C4 Hydrocarbons� NERDDP report EG/83/201,June 1983.

Coffey Geosciences Pty Ltd. “Setting National Fuel Quality Standards� March 2000

CONCAWE Report Number 99/56

FORD SAE Paper 821193

Gary, J.H. and Handwerk, G.E., �Petroleum Refining Technology and Economics, 2ndEdition”, Marcel Dekker, New York, 1984

Grady, S., Osinski, M., �Preliminary Findings of the 12 State MTBE/VOC Drinking WaterRetrospective� presented April 1999 to Blue Ribbon Panel.

Happel, A.M. et al., �An evaluation of MTBE Impacts to Californian Ground WaterResources� Lawrence Livermore National Laboratory report UCRL-AR-130897; presented toBlue Ribbon Panel, March 1999.

Maples, R.E., �Process Refinery Process Economics� PennWell Books, Tulsa, Oklahoma,1993

McNally, M.J., National Petroleum Refiners Association, Annual Meeting, mar 22-24, NewOrleans, 1992 reported in Oil & Gas Journal, 1992, May 25, p. 39

NOHSC: National Occupational Health and Safety Commission. Technical Report. List ofdesignated hazardous substances. NOHSC: 10005. Sydney. Commonwealth of Australia;National Occupational Health and Safety Commission, Worksafe Australia Standard.Adopted national exposure standards for atmospheric contaminants in the occupationalenvironment. NOHSC: 1003. Canberra: Australian Government Publishing Service: 1995

OSTP (Office of Science and Technology Policy), National Science and Technology Council�Interagency Assessment of Oxygenated Fuels,� June 1997

RMIT “Desk Study Octane Enhancers”, November 1994

Salanitro, J.P., �Understanding the Limitations of Microbial Metabolism of Ethers Used asFuel Octane Enhancers�, Curr. Opin. Biotechnol. 6, 337-340, 1995

Semenov, N.N (translated by J.E.S. Bradley), �Some Problems of Chemical Kinetics andReactivity - Volumes I & II � Pergamon Press 1958 & 1959

Duncan Seddon & Associates Pty. Ltd

Squillace, P., �MTBE in the Nations Ground Water, national Water Quality AssessmentProgram Results� presented to the Blue Ribbon Panel April 1999

Steffan, R.J., et.al., �Biodegradation of the Gasoline Oxygenates MTBE, ETBE and TAMEby Propane Oxidising Bacteria� Appl. Environ. Microbiol. 63(11), 4216-4222.


EXHIBITS 1. Ethyl Corporation � Comments on MMT� February 20002. A Aradi, J. W. Roos. B.F. Fort, Jr., T. E. Lee and R. I. Davidson �The Physical and

Chemical Effect of Manganese Oxides on Automobile Catalytic Converters�, SAETechnical paper Series 94047, SAE 1994

3. J. W. Roos, D. L. Lenane, B.F. Fort, D.G Grande, K.L. Dykes �The Effect of ManganeseOxides on OBD-II Catalytic Converter Monitoring�, SAE Technical paper Series 94047,SAE 1994

4. �Achieving Clean Air and Clean Water� Report of the Blue Ribbon Panel on Oxygenatesin Gasoline; September 1999, EPA420-R-99-021

5. T.C. Sneller (Nebraska Ethanol Board) �Oxygen Standard Should be Maintained�6. Lyondell Chemical Company Dissenting Report.7. M.C. Kavanaugh and A. Stocking �Fate and Transport of Ethanol in the Environment�

Presentation to Blue Ribbon Panel, May 24 19998. Malcolm Pirnie Inc. �Evaluation of the Fate and Transport of Methanol in the

Environment� American Methanol Institute, January 1999, (Downloadable @www.methanol.org)

9. Scorecard Lists of Known and Suspected Toxic Compounds with References10. Scorecard data on additives and gasoline components of interest11. State of California Environment Protection Agency - Chemicals Known to the State to

Cause Cancer or Reproductive Toxicity March 10, 200012. Supply and Cost of Alternatives to MTBE in Gasoline - Technical Appendices- Report on

Tax Incentives for Ethanol, California Energy Commission, October 1998.13. Supply and Cost of Alternatives to MTBE in Gasoline - Technical Appendices- Report on

the Oxygenate market: Current production Capacity, Future Supply Prospects and CostEstimates, California Energy Commission, October 1998.

14. Graf Enterprises - Various data sheets relating to Fuel Effect as a gasoline additive.15. Australian Historic Motoring Federation Inc. Submission.16. Octane Enhancer Information held in NICNAS.17. Supply and Cost of Alternatives to MTBE in Gasoline - Technical Appendices-Technical

Documents.18. Supply and Cost of Alternatives to MTBE in Gasoline - Technical Appendices- Ethanol

Blending Properties For Task 3 Modelling Work, California Energy Commission,October 1998.

19. RMIT blending calculations, May 200020. G. Wood and M.Egyed �Risk Assessment for the Combustion Products of

Methylcyclopentadienyl Manganese Tricarbonyl (MMT) in Gasoline� Health Canada,November 1994

21. CONCAWE Report 99/51 �Proposal for Revision of Volatility Classes in EN 228Specification in light of EU fuels directive.�

22. �Alcohols and Ethers, A technical assessment of their application as fuels and fuelcomponents� American Petroleum Institute, API Publication 4261, July 1988.

23. World-Wide Fuel Charter, April 2000.24. �Evaluation of MTBE as a Component of Reformulated Gasoline� C. P. Koshland et alia.,

Submission to EPA Blue Ribbon Panel, March 1999: also University of California MTBEFact Sheet.

25. MMT Information Package - Ethyl Asia Pacific Company, May 2000


26. Supply and Cost of Alternatives to MTBE in Gasoline - Executive Summary and KeyFindings, California Energy Commission, October 1998.

27. Octel PLUTOcen G Octane Improver - technical and hazard data sheets28. Octel �The Impact on Emission System Durability of Plutocen G Treated Gasoline�.29. Plutocen G: Exhaust Emissions � Toxicological data, September 1999

Octane Report

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